NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET FORTH IN
SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS OF
NOVEMBER 27, 1997, 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.
No. 1 U.S. $250,000
EUROTECH, LTD.
8% CONVERTIBLE DEBENTURE DUE NOVEMBER 27, 2000
THIS DEBENTURE is one of a series of duly authorized issued debentures of
Eurotech, Ltd., a corporation organized under the laws of the District of
Columbia and having a principal place of business at 0000 Xxxxxxxx Xxxxxx,
Xxxxx 000, XxXxxxx, Xxxxxxxxxx 00000 (the "Company"), designated as its 8%
Convertible Debentures, due November 27, 2000 (the "Debentures"), in an
aggregate principal amount of $7,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC OPPORTUNITY FUND
LTD., or registered assigns (the "Holder"), the principal sum of Two Hundred
Fifty Thousand Dollars ($250,000), on or prior to November 27, 2000 or such
earlier date as the Debentures are required to be repaid as provided
hereunder (the "Maturity Date") and to pay interest to the Holder on the
principal sum at the rate of 8% per annum, payable quarterly in arrears
commencing March 31, 1998, but in no event later than the earlier to occur of
a Conversion Date (as defined in Section 4(a)(i)) for such principal amount
or the Maturity Date. Interest shall accrue daily commencing on the Original
Issue Date (as defined in Section 6) until payment in full of the principal
sum, together with all accrued and unpaid interest and other amounts which
may become due hereunder, has been made. Interest shall be calculated on the
basis of a 360-day year and for the actual number of days elapsed. Interest
hereunder will be paid to the Person (as defined in Section 6) in whose name
this Debenture (or one or more predecessor Debentures) is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register"). All overdue, accrued and unpaid interest and
other amounts due hereunder shall bear interest at the rate of 15% per annum
(to accrue daily) from the date such interest is due hereunder through and
including the date of payment. The principal of, and interest on, this
Debenture are payable in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, at the address of the Holder last appearing on the Debenture
Register, except that interest due on the principal amount (but not overdue
interest) may, at the Company's option, be paid in shares of Common Stock (as
defined in Section 6) calculated based upon the Conversion Price (as defined
below) on the date such interest was due. All amounts due hereunder other
than such interest shall be paid in cash. Notwithstanding anything to the
contrary contained herein, the Company may not issue shares of Common Stock
in payment of interest on the principal amount if: (i) the number of shares
of Common Stock at the time authorized, unissued and unreserved for all
purposes, or held as treasury stock, is insufficient to pay interest
hereunder in shares of Common Stock; (ii) such shares are not either
registered for resale pursuant to an Underlying Securities Registration
Statement (as defined in Section 6) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), as determined by counsel to the
Company pursuant to a written opinion letter addressed and in form and
substance acceptable to the Holder and the transfer agent for such shares;
(iii) such shares are not actively traded on the OTC Bulletin Board (listed
or quoted for trading on the American Stock Exchange, Nasdaq National Market,
Nasdaq SmallCap Market or The New York Stock Exchange, and any other exchange
on which the Common Stock is then listed for trading (each, a "Subsequent
Market")); or (iv) the issuance of such shares would result in the recipient
thereof beneficially owning more than 4.999% of the issued and outstanding
shares of Common Stock as determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended. The Common Stock shall be
deemed to be "actively traded" on the OTC Bulletin Board under this Debenture
if (a) no less than $400,000 of the Common Stock trades on the OTC Bulletin
Board in any one week and (b) there are no fewer than six (6) market makers
actively making a market in the Common Stock.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of
Debentures outstanding to such Holder. No service charge will be made for
such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement. Prior to due presentment to the Company for transfer of
this Debenture, the Company and any agent of the Company may treat the person
in whose name this Debenture is duly registered on the Debenture Register as
the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture is overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest on or
liquidated damages in respect of, this Debenture, free of any claim of
subordination, as and when the same shall become due and payable (whether on
the applicable quarterly interest payment date, the Conversion Date or the
Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of, this
Debenture, the Purchase Agreement or the Registration Rights Agreement, and
such failure or breach shall not have been remedied within 10 days after the
date on which notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a case
under any applicable bankruptcy or insolvency laws as now or hereafter in
effect or any successor thereto, or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or
any subsidiary thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other proceeding which
remains undismissed for a period of 60 days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or
the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the Company
or any subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they become
due; or the Company or any subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts;
or the Company or any subsidiary thereof shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or any
subsidiary thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement or other
instrument under which there may be issued, or by which there may be secured
or evidenced any indebtedness of the Company in an amount exceeding one
hundred thousand dollars ($100,000), whether such indebtedness now exists or
shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(v) the Common Stock shall fail to be actively traded on the OTC
Bulletin Board or fail to be listed or quoted for trading on any Subsequent
Market if after the Original Issue Date the Common Stock shall be listed or
quoted for trading on any such Subsequent Market, or if the Common Stock
shall be suspended from trading thereon without being actively traded,
relisted or having such suspension lifted, as the case may be, within three
(3) Trading Days;
(vi) the Company shall be a party to any merger or consolidation
pursuant to which the Company shall not be the surviving entity (or, if the
Company is the surviving entity, the Company shall issue or sell to another
Person, or group thereof, in excess of 50% of the Common Stock) or shall
dispose of all or substantially all of its assets in one or more
transactions, or shall redeem more than a de minimis number of shares of
Common Stock (other than redemptions of Underlying Shares);
(vii) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange Commission (the
"Commission") on or prior to the 180th day after the Original Issue Date; or
(viii) an Event (as hereinafter defined) shall not have been cured
to the satisfaction of the Holder prior to the expiration of thirty (30)
days from the Event Date (as hereinafter defined) relating thereto (other
than an Event resulting from a failure of an Underlying Securities
Registration Statement to be declared effective by the Commission on or
prior to the 90th day after the Original Issue Date).
(b) If any Event of Default occurs and is continuing the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other
amounts owing in respect thereof, to the date of acceleration, to be, shall
become, immediately due and payable in cash. The aggregate amount payable
upon an Event of Default in respect of the Debentures shall be equal to the
sum of (i) the Mandatory Prepayment Amount (as defined in Section 6) plus
(ii) the product of (A) the number of Underlying Shares issued in respect of
conversions or as payment of interest hereunder and then held by the Holder
and (B) the Per Share Market Value (as defined in Section 6) on the date
prepayment is demanded or the date the full prepayment price is paid,
whichever is greater. The Holder need not provide and the Company hereby
waives any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available
to it under applicable law. Such declaration may be rescinded and annulled
by Xxxxxx at any time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
Section 4. Conversion.
(a)(i) This Debenture shall be convertible into shares of Common Stock
at the option of the Holder in whole or in part at any time and from time to
time upon the earlier to occur of (1) the date an Underlying Securities
Registration Statement is declared effective by the Commission and (2) the
90th day after the Original Issue Date, and prior to the close of business on
the Maturity Date. The number of shares of Common Stock as shall be issuable
upon a conversion hereunder shall be determined by dividing the outstanding
principal amount of this Debenture to be converted, plus all accrued but
unpaid interest thereon, by the Conversion Price (as defined below), each as
subject to adjustment as provided hereunder. The Holder shall effect
conversions by surrendering the Debentures (or such portions thereof) to be
converted, together with the form of conversion notice attached hereto as
Exhibit A (a "Holder Conversion Notice") to the Company. Each Holder
Conversion Notice shall specify the principal amount of Debentures to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date such Conversion Notice is deemed to have been
delivered hereunder (a "Holder Conversion Date"). If no Holder Conversion
Date is specified in a Holder Conversion Notice, the Holder Conversion Date
shall be the date that such Holder Conversion Notice is deemed delivered
hereunder. Subject to Section 4(b) hereof and Section 3.8 of the Purchase
Agreement, each Holder Conversion Notice, once given, shall be irrevocable.
If the Holder is converting less than all of the principal amount represented
by the Debenture(s) tendered by the Holder with the Holder Conversion Notice,
or if a conversion hereunder cannot be effected in full for any reason, the
Company shall honor such conversion to the extent permissible hereunder and
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 4(b)) a new Debenture for such principal amount as has not
been converted.
(ii) At any time from and after the second anniversary of the
Original Issue Date, all or any portion of the then outstanding principal
amount under this Debenture (plus accrued and unpaid interest thereon) shall
be convertible into Common Stock at the Conversion Price (which for such
purpose shall not be subject to the Floor (as defined in Section 6)) at the
option of the Company; provided, that the Company is not permitted to deliver
a Company Conversion Notice (as defined below) within ten (10) days of
issuing any press release or other public statement relating to such
conversion or at any time when the Underlying Securities Registration
Statement is not then effective or shares of Common Stock are not actively
traded on the OTC Bulletin Board or listed or quoted for trading on a
Subsequent Market. The Company shall effect such conversion by delivering to
the Holder a written notice in the form attached hereto as Exhibit B (the
"Company Conversion Notice"), which Company Conversion Notice, once given,
shall be irrevocable. Each Company Conversion Notice shall specify the
principal amount of Debentures (and accrued but unpaid interest thereon) to
be converted. The Company shall deliver such Company Conversion Notice at
least two (2) Trading Days, but not more than five (5) Trading Days before
the Maturity Date or earlier date of intended conversion (the date that the
Company intends to effect such conversion is hereinafter referred to as the
"Company Conversion Date"). Upon its receipt of a Company Conversion Notice,
the Holder shall surrender the principal amount of Debentures subject thereto
to the office of the Company or of any transfer agent of the Common Stock.
If the Company is converting less than the aggregate principal amount of all
Debentures, the Company shall, upon conversion of the principal amount of
Debentures subject to such Company Conversion Notice and receipt of the
Debentures surrendered for conversion, deliver to the Holder, a replacement
Debenture for such principal amount of Debentures as have not been converted
in the manner and within the time period set forth in Section 4(b). Each of
a Holder Conversion Notice and a Company Conversion Notice is sometimes
referred to herein as a "Conversion Notice," and each of a Holder Conversion
Date and a Company Conversion Date is sometimes referred to herein as a
"Conversion Date."
(b) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement) representing the
number of shares of the Common Stock being acquired upon the conversion of
Debentures (subject to reduction pursuant to Section 3.8 of the Purchase
Agreement), (ii) Debentures in a principal amount equal to the principal
amount of Debentures not converted; (iii) a bank check in the amount of all
accrued and unpaid interest (if the Company has elected and is permitted
hereunder to pay accrued interest in cash), together with all other amounts
then due and payable in accordance with the terms hereof, in respect of
Debentures tendered for conversion and (iv) if the Company has elected to pay
accrued interest in shares of the Common Stock, certificates, which shall be
free of restrictive legends and trading restrictions (other than those
required by Section 3.1(b) of the Purchase Agreement), representing such
number of shares of the Common Stock as equals such interest divided by the
Conversion Price calculated on the Conversion Date; provided, however, that
the Company shall not be obligated to issue certificates evidencing the
shares of the Common Stock issuable upon conversion of the principal amount
of Debentures until Debentures are delivered for conversion to the Company or
the Holder notifies the Company that such Xxxxxxxxx has been mutilated, lost,
stolen or destroyed and complies with Section 9 hereof. If in the case of
any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of the Common Stock to be issued on the
Conversion Date on account of accrued but unpaid interest hereunder, are not
delivered to or as directed by the Holder by the third Trading Day after a
Conversion Date, the Holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion (whether subject to a
Holder or a Company Conversion Notice), in which event the Company shall
immediately return the Debentures tendered for conversion. If the Company
fails to deliver to the Holder such certificate or certificates pursuant to
this Section, including for purposes hereof, any shares of the Common Stock
to be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the fourth Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, $1,500 for each day thereafter until the Company delivers such
certificates (such amount shall also be due for each Trading Day after the
date that the Holder may rescind such conversion until such date as the
Holder shall have received the return of the principal amount of Debentures
relating to such rescission). If the Company fails to deliver to the Holder
such certificate or certificates pursuant to this Section prior to the 20th
day after the Conversion Date, the Company shall, upon notice from the
Holder, prepay such portion of the aggregate of the principal amount of
Debentures then held by such Xxxxxx, as requested by such Holder, for the
Mandatory Prepayment Amount, in cash. If any portion of the Mandatory
Prepayment Amount pursuant to this Section is not paid within seven days
after notice therefor is deemed delivered hereunder, the Company will pay
interest on the Mandatory Prepayment Amount at a rate of 15% per annum (to
accrue daily), in cash to such Holder, accruing from such seventh day until
the Mandatory Prepayment Amount, plus all accrued interest thereon, is paid
in full.
(c) (i) The conversion price (the "Conversion Price") in effect on
any Conversion Date shall be the lesser of (A) $5.38 (the "Initial Conversion
Price") and (B) the Applicable Percentage (as defined in Section 6)
multiplied by the Average Price calculated on the Conversion Date; provided,
that, except as otherwise specifically set fort herein, the Conversion Price
shall not be less than the Floor. Notwithstanding the foregoing, the Floor
shall not apply to any conversions pursuant to Section 4(a)(ii), to any
adjustments of the Conversion Price pursuant to the immediately following
sentence or to adjustments to the Initial Conversion Price as a result of the
provisions of Section 4(c)(ii)-(v). If (a) an Underlying Securities
Registration Statement is not filed on or prior to the 45th day after the
Original Issue Date, or (b) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 12d1-2 promulgated under the
Securities Exchange Act of 1934, as amended, within five (5) Business Days of
the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that an Underlying Securities Registration
Statement will not be "reviewed" or is not subject to further review or
comment by the Commission, or (c) the Underlying Securities Registration
Statement is not declared effective by the Commission on or prior to the 90th
day after the Original Issue Date, or (d) such Underlying Securities
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities (as
such term is defined in the Registration Rights Agreement) at any time prior
to the expiration of the "Effectiveness Period" (as such term as defined in
the Registration Rights Agreement), without being succeeded by a subsequent
Underlying Securities Registration Statement filed with and declared
effective by the Commission within ten (10) days, or (e) trading in the
Common Stock shall fail to be actively traded on the OTC Bulletin Board or if
the Common Stock shall be suspended or delisted from trading on any
Subsequent Market for any reason for more than three (3) Trading Days, or (f)
the conversion rights of the Holders of Debentures are suspended for any
reason or if the Holder is not permitted to resell Registrable Securities
under the Underlying Securities Registration Statement, or (g) an amendment
to the Underlying Securities Registration Statement is not filed by the
Company with the Commission within ten (10) days of the Commission's
notifying the Company that such amendment is required in order for the
Underlying Securities Registration Statement to be declared effective (any
such failure being referred to as an "Event," and for purposes of clauses
(a), (c) and (f) the date on which such Event occurs, or for purposes of
clause (b) the date on which such five (5) days period is exceeded, or for
purposes of clauses (d) and (g) the date which such ten (10) day period is
exceeded, or for purposes of clause (e) the date on which such three (3)
Trading Day period is exceeded, being referred to as "Event Date"), the
Company shall pay, in cash, as liquidated damages and not as a penalty, on
the Event Date and on the first day of each month thereafter until the
triggering Event is cured, 1.0% of the aggregate principal amount of
Debentures then outstanding.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Company, the Initial Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of the
Common Stock outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common
Stock (and not to Holders of Debentures) entitling them to subscribe for or
purchase shares of the Common Stock at a price per share less than the Per
Share Market Value of the Common Stock at the record date mentioned below,
the Initial Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of the Common Stock offered
for subscription or purchase, and of which the numerator shall be the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants. However, upon the expiration of
any right or warrant to purchase shares of the Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to
this Section, if any such right or warrant shall expire and shall not have
been exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions
of this Section 4 after the issuance of such rights or warrants) had the
adjustment of the Initial Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such case
the Initial Conversion Price at which Debentures shall thereafter be
convertible shall be determined by multiplying the Initial Conversion Price
in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of the Common Stock
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value of the Common Stock on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors
in good faith; provided, however, that in the event of a distribution
exceeding ten percent (10%) of the net assets of the Company, such fair
market value shall be determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants
of recognized standing (which may be the firm that regularly examines the
financial statements of the Company) (an "Appraiser") selected in good faith
by the holders of a majority in interest of Debentures then outstanding; and
provided, further, that the Company, after receipt of the determination by
such Appraiser shall have the right to select an additional Appraiser, in
good faith, in which case the fair market value shall be equal to the average
of the determinations by each such Appraiser. In either case the adjustments
shall be described in a statement provided to the holders of Debentures of
the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(v) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Debenture shall
have the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture only into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of the Common Stock following such
reclassification or share exchange, and the Holders of the Debentures shall
be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Company into which the then
outstanding principal amount, together with all accrued but unpaid interest
and any other amounts then owing hereunder in respect of this Debenture could
have been converted immediately prior to such reclassification or share
exchange would have been entitled or (B) require the Company to prepay, from
funds legally available therefor at the time of such prepayment, the
aggregate of its outstanding principal amount of Debentures, plus all
interest and other amounts due and payable thereon, at a price determined in
accordance with Section 3(b). The entire prepayment price shall be paid in
cash. This provision shall similarly apply to successive reclassifications
or share exchanges.
(vi) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is adjusted
pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly mail to
each Holder of Debentures a notice setting forth the Initial Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
D. the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the Company,
any consolidation or merger to which the Company is
a party, any sale or transfer of all or
substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up
of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Debentures, and shall cause to be mailed
to the Holders of Debentures at their last addresses as they shall appear
upon the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are entitled to
convert Debentures during the 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of the Common Stock
solely for the purpose of issuance upon conversion of the Debentures and
payment of interest on the Debentures, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of the Common
Stock as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 4(c)) upon
the conversion of the outstanding principal amount of the Debentures and
payment of interest hereunder. The Company covenants that all shares of the
Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the Underlying
Securities Registration Statement has been declared effective under the
Securities Act, freely tradeable.
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to
be provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed
to the Company, at 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, XxXxxxx, Xxxxxxxxxx 00000
(facsimile number (000) 000-0000), attention Chief Financial Officer, or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this Section.
Any and all notices or other communications or deliveries to be provided by
the Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to each Holder of
the Debentures at the facsimile telephone number or address of such Holder
appearing on the books of the Company, or if no such facsimile telephone
number or address appears, at the principal place of business of the holder.
Any notice or other communication or deliveries hereunder shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 7:00 p.m. (New York City time),
(ii) the date after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section later than 7:00 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) four days
after deposit in the United States mail, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier service,
or (v) upon actual receipt by the party to whom such notice is required to be
given.
Section 5. Optional Prepayment.
(a) The Company shall have the right, exercisable at any time upon
twenty (20) Trading Days prior written notice to the Holders of the
Debentures to be prepaid (the "Optional Prepayment Notice"), to prepay, from
funds legally available therefor at the time of such prepayment, all or any
portion of the outstanding principal amount of the Debentures which have not
previously been repaid or for which Conversion Notices have not previously
been delivered hereunder, at a price equal to the Optional Prepayment Price
(as defined below). Any such prepayment by the Company shall be in cash and
shall be free of any claim of subordination. The Holders shall have the
right to tender, and the Company shall honor, Conversion Notices delivered
prior to the expiration of the twentieth (20th) Trading Day after receipt by
the Holders of an Optional Prepayment Notice for such Debentures (such date,
the "Optional Prepayment Date").
(b) If any portion of the Optional Prepayment Price shall not be
paid by the Company by the Optional Prepayment Date, the Optional Prepayment
Price shall be increased by 15% per annum (to accrue daily) until paid (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the optional Prepayment Price remains unpaid
through the expiration of the Optional Prepayment Date, the Holder subject to
such prepayment may elect by written notice to the Company to either (i)
demand conversion in accordance with the formula and the time period therefor
set forth in Section 4 of any portion of the principal amount of Debentures
for which the Optional Prepayment Price, plus accrued liquidated damages
thereof, has not been paid in full (the "Unpaid Prepayment Principal
Amount"), in which event the applicable Per Share Market Value shall be the
lower of the Per Share Market Value calculated on the Optional Prepayment
Date and the Per Share Market Value as of the Holder's written demand for
conversion, or (ii) invalidate ab initio such optional redemption,
notwithstanding anything herein contained to the contrary. If the Holder
elects option (i) above, the Company shall, within three (3) Trading Days of
the date such election is deemed delivered hereunder, deliver to the Holder
the shares of Common Stock issuable upon conversion of the Unpaid Prepayment
Amount subject to such conversion demand and otherwise perform its
obligations hereunder with respect thereto; or, if the Holder elects option
(ii) above, the Company shall promptly, and in any event not later than three
(3) Trading Days from receipt of notice of such election, return to the
Holder new Debentures for the full Unpaid Prepayment Principal Amount. If,
upon an election under option (i) above, the Company fails to deliver the
shares of Common Stock issuable upon conversion of the Unpaid Prepayment
Principal Amount within four (4) Trading Days of the date that such election
is deemed delivered hereunder, the Company shall pay to the Holder in cash,
as liquidated damages and not as a penalty, $1,500 per day until the Company
delivers such Common Stock to the Holder.
(c) The "Optional Prepayment Price" for any Debentures shall equal
the sum of (i) the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on (x)
the Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is less, multiplied by the Average Price on (x) the
Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is greater, and (ii) all other amounts, expenses,
costs and liquidated damages due in respect of such principal amount.
Section 6. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Applicable Percentage" means (i) 80% for any conversion honored
prior to the 180th day after the Original Issue Date, (ii) 75% for any
conversion honored on or after the 180th day and prior to the 360th after the
original Issue Date, and (iii) 70% for any conversion honored after the 360th
day after the Original Issue Date. For purposes hereof, a conversion is
deemed to have been honored when the shares of Common Stock issuable in
respect of such conversion are received by the Holder.
"Average Price" on any date means the average Per Share Market
Value for the five (5) Trading Days immediately preceding such date.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government
action to close.
"Common Stock" means the Company's common stock, $.00025 par value
per share, of the Company and stock of any other class into which such shares
may hereafter have been reclassified or changed.
"Floor" initially means $2.00, provided, that, the Floor shall be
reset if at any time after the Original Issue Date the Average Price
calculated on any date shall be equal to or less than $2.00 for 30
consecutive Trading Days. In such event, the Floor shall be reset to 75% of
the average Per Share Market Value for the ten (10) Trading Days commencing
the 21st day of the 30-day period contemplated by the immediately preceding
sentence.
"Mandatory Prepayment Amount" for any Debentures shall equal the
sum of (i) the principal amount of Debentures to be prepaid, plus all accrued
and unpaid interest thereon, divided by the Conversion Price on (x) the date
the Mandatory Prepayment Amount is demanded or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the
Average Price on (x) the date the Mandatory Prepayment Amount is demanded or
(y) the date the Mandatory Prepayment Amount is paid in full, whichever is
greater, and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such Debentures.
"Original Issue Date" shall mean the date of the first issuance of
any Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"Per Share Market Value" on any particular date means (a) the
closing bid price per share of the Common Stock on such date as quoted by
Bloomberg Information Services, Inc. ("Bloomberg"), or similar organizations
or agencies succeeding to its functions of reporting prices, or (b) if the
Common Stock is no longer reported by Bloomberg, or such similar
organizations or agencies, such closing bid price per share shall be
determined by reference to "Pink Sheet" quotes for the relevant conversion
period as determined in good faith by the Holder or (c) if the Common Stock
is not then publicly traded, the fair market value of a share of Common Stock
as determined by an appraiser selected in good faith by the Holders of a
majority in interest of the Debentures (the Company, after receipt of the
determination by such appraiser, shall have the right to select an additional
appraiser, in which case, the fair market value shall be equal to the average
of the determinations by each such appraiser).
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time
to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time
to time in accordance with its terms.
"Trading Day" means (a) a day on which the Common Stock is traded
on the Nasdaq Stock Market or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
Nasdaq Stock Market or any stock exchange or market, a day on which the
Common Stock is traded on the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted on the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices).
"Underlying Shares" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms hereof and the
Purchase Agreement.
"Underlying Securities Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares
and naming the Holder as a "selling stockholder" thereunder.
Section 7. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation
of the Company. This Debenture ranks pari passu with all other Debentures
now or hereafter issued under the terms set forth herein. The Company may
only voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
Section 8. This Debenture shall not entitle the Holder to any
of the rights of a stockholder of the Company, including without limitation,
the right to vote, to receive dividends and other distributions, or to
receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
Section 9. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
Section 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company hereby irrevocably submits to the
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, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. The Company hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by receiving a copy thereof sent to the Company at the
address in effect for notices to it under this instrument and agrees that
such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.
Section 11. Any waiver by the Company or the Holder of a breach
of any provision of this Debenture shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
Section 12. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and
circumstances.
Section 13. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day (or, if such next succeeding Business Day
falls in the next calendar month, the preceding Business Day in the
appropriate calendar month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Debenture to be
duly executed by a duly authorized officer as of the date first above
indicated.
EUROTECH, LTD.
By:/s/ Xxxxxxxx X. Xxxxxx, Xx.
________________________________
Name: Xxxxxxxx X. Xxxxxx, Xx.
Title: Chairman & CEO
Attest:
By:/s/ Xxxxx Xxxxxx
___________________________
Name: Xxxxx Xxxxxx
Title: Director of Corporate Planning
EXHIBIT A
EUROTECH, LTD.
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. 1 into shares of
Common Stock, $.00025 par value per share (the "Common Stock"), of EUROTECH,
LTD. (the "Company") according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations: ______________________________________________
Date to Effect Conversion
______________________________________________
Principal Amount of Debentures to be Converted
______________________________________________
Number of shares of Common Stock to be Issued
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
______________________________________________
Name
______________________________________________
Address
EXHIBIT B
EUROTECH, LTD.
NOTICE OF CONVERSION
AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of EUROTECH, LTD. (the "Company")
hereby notifies the addressee hereof that the Company hereby elects to
exercise its right to convert the above Debenture No. 1 into shares of Common
Stock, par value $.00025 per share (the "Common Stock"), of the Company
according to the conditions hereof, as of the date written below. No fee
will be charged to the Holder for any conversion hereunder, except for such
transfer taxes, if any, which may be incurred by the Company if shares are to
be issued in the name of a person other than the person to whom this notice
is addressed.
Conversion calculations: ______________________________________________
Date to Effect Conversion
______________________________________________
Principal Amount of Debentures to be Converted
______________________________________________
Applicable Conversion Price
______________________________________________
Amount of Interest due on the Principal Amount
of Debentures to be Converted
______________________________________________
Number of Shares of Common Stock
outstanding at close of trading
on Conversion Date
______________________________________________
Signature
______________________________________________
Name:
______________________________________________
Address: