EXHIBIT 10.61
THIS BRIDGE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED
UNLESS REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
COMPOSITECH LTD.
SECURED CONVERTIBLE BRIDGE FINANCING NOTE
UNDENOMINATED $98,327.00 October 4, 1999
COMPOSITECH LTD., a Delaware corporation (such corporation, or any
successor permitted hereunder, the "Company"), for value received, hereby
promises to pay to SOVEREIGN CAPITAL ADVISORS, LLC, a Nevada limited liability
company or any subsequent holder hereof (such holders, assignees, or any
registered assignees, the "Holders"), the principal sum of NINETY EIGHT THOUSAND
THREE HUNDRED TWENTY-SEVEN AND NO/100 DOLLARS (US $98,327.00), and to pay
interest on such principal sum, at the rate of eight percent (8%) per annum (the
"Note Rate") from the Original Issue Date (as defined below) until March 31,
2000 (the "Maturity Date") and at the rate of eleven percent (11%) per annum
(the "Default Rate") after the Maturity Date until payment of all principal,
premium, and accrued and unpaid interest has been paid in full. Interest shall
be payable on the Maturity Date. All such interest shall be computed on the
basis of the actual number of days elapsed during any interest period in a year
of 360 days. The date on which this Bridge Note shall have first been issued is
referred to herein as the "Original Issue Date."
Section 1. Description. This Bridge Note has been authorized by the Company
(the "Bridge Notes"), and is in registered form. This Bridge Note is issued by
the Company on and as of the Original Issued Date to evidence the placement fee
owed to Sovereign Capital Advisors, LLC as part of the cancellation of the
original Bridge Notes and issuance of replacement Bridge Notes on the date
hereof. This Bridge Note is convertible, into shares of the Company's Common
Stock, $.01 par value (the "Common Stock"), as provided herein, and, effective
upon any such conversion, the Common Stock so issued shall be subject to all
terms and conditions and shall enjoy all rights, privileges, and preferences
applicable to such Common Stock under the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation"). The shares of
Common Stock issuable upon conversion of this Bridge Note (the "Conversion
Shares") are entitled to registration rights pursuant to a Registration Rights
Agreement between the Company, and certain other signatories thereto dated March
16, 1999, as amended (the "Registration Rights Agreement"). This Bridge Note is
issued as payment of placement fees governed by the terms of a Placement Agent
Agreement dated March 16, 1999 between the Company and Holder, as placement
agent thereunder. This Bridge Note will be secured from time to time by certain
specified equipment of the Company as agreed to between the Company and the
Holder, and is made and entered into by the Company and Holder as part of the
consummation of the transactions called for in Bridge Note Purchase and Security
Agreement dated March 16, 1999, as amended (the "Purchase Agreement") and the
letter agreement among the Purchasers dated November 22, 1999, and to the extent
relevant to this Bridge Note is otherwise entitled to all of the rights and
benefits thereunder.
Section 2. Office for Registration and Conversion. The Company shall
maintain an office where this Bridge Note shall be surrendered or presented for
registration of transfers or exchanges and conversions. This office will
initially be located at the offices of the Company at 000 Xxxxxxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxx 00000. The Company shall keep a register of the Bridge Notes
and of their transfer and exchange, including the names and addresses of Holders
of the Bridge Notes. Holder shall give the Company notice of any change in
Xxxxxx's address to the office indicated in this Section 2. Upon two (2)
business days written request, the Company shall permit Holder or its duly
authorized representatives to inspect such register. Upon written notice to
Holder, the Company may change the address of the office to
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be maintained by the Company pursuant to this Section 2 or appoint one or more
co-registrars, stock registrars, paying agents, or conversion agents to assist
the Company in performing its functions under the Bridge Notes.
Section 3. Redemption.
(a) Mandatory Redemption. If this Bridge Note is outstanding on the
Maturity Date, this Bridge Note shall be due and payable as follows:
(i) if on the Maturity Date a Registration Statement is effective
with respect to the Conversion Shares, the Company shall give written
notice to Holder of its intent to redeem the then outstanding
principal amount of this Bridge Note, which notice shall state the
election of the Company to pay the redemption price in cash or by
conversion of this Bridge Note into Common Stock, in the manner
contemplated by Section 3(c) hereof. Regardless of the manner is which
paid, the redemption price (the "Maturity Date Redemption Price")
shall be equal to 117.5% of the then outstanding principal amount of
this Bridge Note plus accrued and unpaid interest thereon at the Note
Rate through and including the Maturity Date and at the Default Rate
after the Maturity Date through and including the date the payment is
disbursed (whether by issuance of Conversion Shares or a payment in
cash).
(ii) if on the Maturity Date a Registration Statement is not
effective with respect to the Conversion Shares, Holder may, in
addition to all other rights and remedies of Holder hereunder and
under the Purchase Agreement, elect to make written demand to the
Company to redeem, all or part of the then outstanding principal under
this Bridge Note. Such demand shall specify Xxxxxx's election to
accept payment of the redemption price in cash or by conversion of
this Bridge Note into Common Stock, in the manner contemplated by
Section 3(c) hereof. The Company shall have two (2) Business Days
after its receipt of such demand to confirm its intention to redeem
this Bridge Note by tendering to Holder either (A) cash or (B)
Conversion Shares (as specified in Holder's demand), in the manner
contemplated by Section 3(c) hereof. In either case the redemption
price shall be equal to the Maturity Date Redemption Price.
(iii) The date of any redemption under either subparagraph (i) or
(ii) above shall be referred to as a "Redemption Date."
(b) Voluntary Redemption. At any time from and after the Original
Issue Date up to but not including the Maturity Date, the Company may, at
its option, call and redeem this Bridge Note, at the redemption price set
forth in subparagraph (i), below, plus accrued and unpaid interest on such
redeemed amount through and including the Voluntary Redemption Date, as
such term is defined below (such redemption being the "Voluntary
Redemption"), under and in accordance with the following terms and
procedures:
(i) The Company at its option prior to the Maturity Date may
redeem this Bridge Note at the Redemption Price set forth below plus
all accrued and unpaid interest on the principal amount through and
including the Voluntary Redemption Date (the "Voluntary Redemption
Price") as of a Voluntary Redemption Date:
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Redemption Date Redemption Price
--------------- ----------------
Original Issue Date through and including the 90th day after the 110%
Original Issue Date
91st day after the Original Issue Date through and including the 112 1/2%
120th day after the Original Issue Date
121st day after the Original Issue Date through and including the 115%
150th day after the Original Issue Date
151st day after the Original Issue Date through and including the 117 1/2%
date of redemption or conversion
(ii) At least ten (10) days before a Voluntary Redemption, the
Company shall mail a notice of redemption to Holder, stating (A) the
redemption date, which shall be a business day in New York, New York
(the "Voluntary Redemption Date"), (B) the aggregate principal amount
of this Bridge Note to be redeemed, (C) the Voluntary Redemption
Price, and (D) the name and address of the Person to whom this Bridge
Note must be presented to receive payment if required pursuant to
paragraph (iv) below. Once notice of redemption is mailed and the
Company shall have complied with paragraph (iii) below, the Voluntary
Redemption Price shall become due and payable on the Voluntary
Redemption Date.
(iii) On or before the third (3rd) day prior to the Voluntary
Redemption Date, the Company shall deposit into a bank trust account
for the benefit of the Holder of this Bridge Note money sufficient to
pay the Redemption Price and all accrued and unpaid interest.
(iv) The Company may, at its option, require as a condition to
the receipt of a payment pursuant to this Section 3(b) that Holder
present the Bridge Notes to the Person specified in paragraph (ii)
above for surrender.
(v) No Voluntary Redemption of this Bridge Note can be effected
after the 179th day after the Original Issue Date.
(c) Conversion into Common Stock in Lieu of Payments.
(i) In lieu of payment of cash to Holder pursuant to Section
3(a)(i) hereof and Section 3(b) hereof, the Company may, elect to pay
all or part of the Maturity Date Redemption Price or the Voluntary
Redemption Price in Conversion Shares, under the terms of Section 3(d)
hereof.
(ii) In lieu of cash, pursuant to Section 3(a)(ii) hereof, Holder
may require the Company to pay all or part of the Maturity Date
Redemption Price in Conversion Shares, under the terms of Section 3(d)
hereof.
The Repricing Warrant shall apply to each share of Common Stock received by
Holder pursuant to this Section 3(c).
(d) The number of shares of Common Stock issuable in payment of the
Mandatory Redemption Price or the Voluntary Redemption Price is equal to
the quotient of the Mandatory
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Redemption Price or the Voluntary Redemption Price (as the case may be)
divided by $1.1375, (the "Conversion Price"). Fractional shares will not be
issued. In lieu of any fraction of a share, the Company shall deliver its
check for the dollar amount of the less-than full share remainder.
Section 4. Method of Payment.
(a) Interest accruing through and including the Maturity Date shall be
computed at the Note Rate. Interest accruing after the Maturity date shall
be computed at the Default Rate. Accrued and unpaid interest shall be due
and payable at the time the principal and premium of this Bridge Note is
paid. All such interest shall be computed on the basis of the actual number
of days elapsed during any interest period in a year of 360 days. Interest
shall begin to accrue on the Original Issue Date.
(b) The Company shall pay interest and principal on this Bridge Note
(except defaulted interest) to the Person who is the registered Holder of
this Bridge Note on the day on which the interest or principal payment is
due. If the Company defaults in a payment of interest on this Bridge Note,
it may pay the defaulted interest, plus any interest on the defaulted
interest if permitted provided by Section 4(d) below, to the Person who is
the registered Holder of this Bridge Note on the date such payment is made.
(c) The Company shall pay interest by check payable in money of the
United States of America that at the time of payment is legal tender for
public and private debts. Payments of interest shall be mailed to Xxxxxx's
address shown in the register maintained pursuant to Section 2; provided
however, that with respect to the final payment of principal and accrued
and unpaid interest necessary to pay this Bridge Note in full, to receive
such payment Holder must surrender this Bridge Note for cancellation to the
Company or to a paying agent appointed by the Company. Principal and
interest shall be considered paid on the date due, and no interest shall
accrue thereafter, if there is on deposit on that date, in a bank trust
account for the benefit of Holder of this Bridge Note, money sufficient to
pay the Redemption Price and all accrued and unpaid interest due under this
Bridge Note.
Section 5. Conversion Price and Adjustments.
(a) At anytime after the Maturity Date, Holder may convert all or any
portion of the Redemption Price and accrued and unpaid interest due on this
Bridge Note into shares of Common Stock.
(b) If Holder elects to convert less than the full Redemption Price of
this Bridge Note, such conversion shall be permitted only in one hundred
(100)-share increments unless the Company has given its contemporaneous
consent to conversion of an odd lot. The provisions hereof that apply to
conversion of the entire Redemption Price of this Bridge Note shall also
apply to conversion of a portion of the Redemption Price. Upon surrender of
the Bridge Note for conversion in part, the Company shall issue new Bridge
Notes in substantially the same form as this Bridge Note, except that the
principal amount shall be reduced by the principal amount so converted
(exclusive of the redemption premium).
(c) The number of shares of Common Stock issuable upon conversion of
this Bridge Note is equal to the quotient of the Redemption Price of this
Bridge Note being converted divided by Conversion Price. Fractional shares
will not be issued. In lieu of any fraction of a share, the Company shall
deliver its check for the dollar amount of the less than full share
remainder. Accrued and unpaid interest shall be included in computing the
number of Conversion Shares
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issuable upon conversion of this Bridge Note. Interest shall cease to
accrue on that portion of the Redemption Price converted from and after the
Conversion Date.
Section 6. Procedures for Conversion, and Issuance of Conversion Shares.
(a) Holders' Delivery Requirements. To convert this Bridge Note into
Common Stock, (the "Conversion Date"), the Holder hereof shall (A) deliver
or transmit by facsimile, for receipt on or prior to 11:59 P.M., Eastern
Time, on such date, a copy of a fully executed notice of conversion in the
form attached hereto as Exhibit A (the "Conversion Notice") to the Company
or its designated Transfer Agent, and (B) surrender to a common carrier for
delivery to the Company or the Transfer Agent as soon as practicable
following such date, the original Bridge Note being converted (or an
indemnification undertaking with respect to such shares in the case of the
loss, theft, or destruction of the Bridge Note) and the originally executed
Conversion Notice. The date the Company receives the Conversion Note and
this Bridge Note is hereinafter the "Conversion Date."
(b) Company's Response. Upon receipt by the Company of a facsimile
copy of a Conversion Notice, the Company shall immediately send, via
Facsimile, a confirmation of receipt of such Conversion Notice to Holder.
Upon receipt by the Company or the Transfer Agent of the Bridge Note to be
converted pursuant to a Conversion Notice, together with the originally
executed Conversion Notice, the Company or the Transfer Agent (as
applicable) shall, within five (5) business days following the date of
receipt, (A) issue and surrender to a common carrier for overnight delivery
to the address as specified in the Conversion Notice, a certificate,
registered in the name of Holder or its designee, for the number of shares
of Common Stock to which Holder shall be entitled or (B) credit the
aggregate number of shares of Common Stock to which such Holder shall be
entitled to the Holder's or its designee's balance account at The
Depository Trust Company.
(c) Record Holder. The Person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of this Bridge Note shall
be treated for all purposes as the "Record Holder" or Holder of such shares
of Common Stock on the Conversion Date.
(d) Company's Failure to Timely Convert. If the Company shall fail to
issue to Holder within five (5) business days following the date of receipt
by the Company or the Transfer Agent of this Bridge Note to be converted
pursuant to a Conversion Notice, a certificate for the number of shares of
Common Stock to which each Holder is entitled upon Holder's conversion of
this Bridge Note, in addition to all other available remedies which such
Holder may pursue hereunder against the Company, the Company shall pay
additional damages to Holder on each day after the fifth (5th) business day
following the date of receipt by the Company or the Transfer Agent an
amount equal to 1.0% of the product of (A) the number of shares of Common
Stock not issued to Holder and to which Holder is entitled multiplied by
(B) the Closing Bid Price of the Common Stock on the business day following
the date of receipt by the Company or the Transfer Agent of the Conversion
Notice. The foregoing notwithstanding, Holder at its option may withdraw a
Conversion Notice, and remain a Holder of this Bridge Note, if Holder has
otherwise complied with this Section 6.
(e) If any adjustment to the Conversion Price to be made pursuant to
Section 7 becomes effective immediately after a record date for an event as
therein described, and conversion occurs prior to such event but after the
record date, the Company may defer issuing, delivering, or paying to Holder
any additional shares of Common Stock or check for any cash remainder
required by reason of such adjustment until the occurrence of such event,
provided that the Company delivers to Holder a due bill or other
appropriate instrument evidencing the Holders' right to
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receive such additional shares or check upon the occurrence of the event
giving rise to the adjustment.
(f) Until such time as this Bridge Note has been fully redeemed, the
Company shall reserve out of its authorized but unissued Common Stock
enough shares of Common Stock to permit the conversion of the entire
Redemption Price and all accrued and unpaid interest due on this Bridge
Note at any time. All shares of Common Stock issued upon conversion of this
Bridge Note shall be fully paid and nonassessable. The Company covenants
that if any shares of Common Stock, required to be reserved for purposes of
conversion of this Bridge Note hereunder, require registration with or
approval of any governmental authority under any federal or state law or
listing upon any national securities exchange before such shares may be
issued upon conversion, the Company shall in good faith, as expeditiously
as possible, endeavor to cause such shares to be duly registered, approved
or listed, as the case may be.
Section 7. Adjustments to Conversion Price. The Conversion Price shall be
subject to adjustment from time to time as follows:
(a) If the Company at any time subdivides (by any stock split, stock
dividend, recapitalization, or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by
combination, reverse stock split, or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
(b) Prior to the consummation of any Organic Change (as defined
below), the Company will make appropriate provision (in form and substance
satisfactory to the Holder to insure that Holder will thereafter have the
right to acquire and receive in lieu of, or in addition to, (as the case
may be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of this Holder's Bridge Note, such shares of
stock, securities, or assets as may be issued or payable with respect to,
or in exchange for, the number of shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of this Bridge
Note had such Organic Change not taken place. In any such case, the Company
will make appropriate provision (in form and substance satisfactory to
Holder with respect to such Holder's rights and interests to insure that
the provisions of this Section 7(b) and Sections 7(c) and 7(d) below will
thereafter be applicable. The Company will not effect any such
consolidation, merger, or sale, unless prior to the consummation thereof
the successor entity (if other than the Company) resulting from
consolidation or merger or the entity purchasing such assets assumes, by
written instrument (in form and substance satisfactory to Holder, the
obligation to deliver to Holder such shares of stock, securities, or assets
as, in accordance with the foregoing provisions, that Holder may be
entitled to acquire. For purposes of this Agreement, "Organic Change" means
any recapitalization, reorganization, reclassification, consolidation,
merger, or sale of all or substantially all of the Company's assets to
another Person (as defined below), or other similar transaction which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities, or
assets with respect to or in exchange for Common Stock; and "Person" means
an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, and a government or
any department or agency thereof.
Section 8. Notices. The Company shall give the following notices at the times
specified:
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(a) Immediately upon any adjustment of the Conversion Price, the
Company will give written notice thereof to Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(b) The Company will give written notice to Holder, at least twenty
(20) days prior to the date on which the Company closes its books or takes
a record (i) with respect to any dividend or distribution upon the Common
Stock, (ii) with respect to any pro rata subscription offer to Holder of
Common Stock, or (iii) for determining rights to vote with respect to any
Organic Change, dissolution, or liquidation.
(c) The Company will also give written notice to Holder at least
twenty (20) days prior to the date on which any Organic Change, Major
Transaction (as defined below), dissolution, or liquidation will take
place.
Section 9. Successors to the Company. The Company shall not consolidate or
merge with or into, or sell all or substantially all of its assets to, any
Person unless: (i) the Person is a corporation; (ii) such Person executes, and
mails to Holder a copy of, an instrument by which such Person or an affiliate
assumes the due and punctual payment of the principal of and interest on this
Bridge Note and the performance and observance of all the obligations of the
Company under this Series1 Bridge Note; and (iii) immediately after giving
effect to the transaction, no Event of Default or event which after notice or
lapse of time or both would become an Event of Default shall have occurred. Upon
compliance with this Section 9, Successor Corporation shall succeed to and be
substituted for the Company under this Bridge Note with the same effect as if
the Successor Corporation had been named as the Company herein. Nothing in this
Bridge Note shall prevent any consolidation or merger in which the Company is
the surviving corporation, or any acquisition by the Company by purchase or
otherwise of all or any part of the assets of any other Person, and no such
consolidation, merger, or acquisition shall require compliance with this Section
9.
Section 10. Events of Default and Remedies.
(a) As used herein, an "Event of Default" occurs if:
(i) The Company defaults in the payment of principal and/or
interest when the same becomes due and payable.
(ii) the Company fails to comply with any other provision
contained in this Bridge Note, the Purchase Agreement, the Repricing
Warrant, the Sovereign Warrant Agreement, or the Registration Rights
Agreement, and such failure is not cured within five (5) days after
the Company receives written demand from Holder to remedy the same;
(iii) the Company defaults in any payment of principal of or
interest on any Debt (excluding trade payables) in excess of $100,000
beyond any period of grace provided with respect thereto and the
effect of such failure is to cause the holder of such Debt to
accelerate the Debt such that such Debt becomes due prior to its
stated maturity;
(iv) any representation or warranty made in writing by or on
behalf of (i) the Company in the Purchase Agreement or in any writing
furnished in connection with or pursuant to the Purchase Agreement or
in connection with the transactions contemplated by this Agreement, or
(ii) the Company in the Registration Rights Agreement, or (iii) the
Company in the Escrow Agreement, shall be false in any material
respect on the date as of which made;
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(v) the Company makes an assignment for the benefit of creditors
or is generally not paying its debts as such debts become due;
(vi) any order or decree for relief in respect of the Company is
entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution, or liquidation or
similar law, whether now or hereafter in effect (herein called the
"Bankruptcy Law"), of any jurisdiction;
(vii) the Company petitions or applies to any tribunal for, or
consents to, the appointment of, or taking possession by, a trustee,
receiver, custodian, liquidation, or similar official of the Company,
or of any substantial part of the assets of the Company, or commences
a voluntary case under the Bankruptcy Law of the United States or any
proceedings relating to the Company under the Bankruptcy Law of any
other jurisdiction;
(viii) any petition or application described in Section 10(a)(vi)
above is filed, or any such proceedings are commenced, against the
Company and the Company by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee, receiver, custodian,
liquidator, or similar official, or approving the petition in any such
proceedings, and such order, judgment, or decree remains unstayed and
in effect for more than sixty (60) days;
(ix) any order, judgment, or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment, or decree remains unstayed and in effect for more
than sixty (60) days; or
(x) a final judgment (not fully covered by insurance) in an
amount in excess of $100,000 is rendered against the Company and,
within ten (10) business days after entry thereof, such judgment is
not discharged or execution thereof stayed pending appeal, or within
ten (10) days after the expiration of any such stay, such judgment is
not discharged.
(b) Upon the occurrence of an Event of Default described in subsection
(vi), (vii), or (viii) of Section 10(a), the principal of and accrued
interest on this Bridge Note shall automatically become immediately due and
payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by the Company. If any other
Event of Default exists, Holder may, in addition to the exercise of any
right, power, or remedy permitted to Holder by law, declare (by written
notice or notices to the Company) the entire principal of and all interest
accrued on this Bridge Note to be due and payable, and this Bridge Note
shall thereupon become immediately due and payable, without presentment,
demand, protest, or other notice of any kind, all of which are hereby
expressly waived by the Company. Upon such declaration, the Company will
immediately pay to Holder of this Bridge Note the then outstanding
principal of and accrued and unpaid interest on the Bridge Notes. If at any
time after acceleration of the maturity of the Bridge Notes, the Company
shall pay all arrears of interest and all payments on account of principal
which shall have become due other than by acceleration (with interest on
principal and, to the extent permitted by law, on overdue interest, at the
rate specified in the Bridge Notes) and all Events of Default (other than
nonpayment of principal of or interest on this Bridge Note due and payable
solely by virtue of acceleration) shall be remedied or waived by Holder by
written notice to the Company may rescind and annul the acceleration and
its consequences, but such action shall not affect any subsequent Event of
Default or impair any right consequent thereon.
(c) A delay or omission by the Holder of this Bridge Note in
exercising any right or remedy arising upon an Event of Default shall not
impair such right or remedy or constitute a waiver of or an acquiescence in
the Event of Default.
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(d) If any Event of Default shall occur and be continuing, the Holder
of this Bridge Note may proceed to protect and enforce their rights under
this Agreement and this Bridge Note by exercising such remedies as are
available to such Holder either by suit in equity or by action at law, or
both, whether for specific performance of any covenant or other agreement
contained in this Agreement or in aid of the exercise of any power granted
in this Agreement. No remedy conferred in this Agreement upon Holder is
intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every other remedy
conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
Section 11. Exchange, Transfer, Replacement or Cancellation.
(a) This Bridge Note may be exchanged for an equal principal amount of
Bridge Notes in denominations of US$25,000.00 or in greater multiples of
US$5,000.00 upon written request to the Company accompanied by surrender of
this Bridge Note to the Company or to an agent designated for that purpose.
Any Bridge Notes issued in exchange for this Bridge Note shall be one of
this Bridge Note referred to in Section 1, and shall be entitled to all the
rights thereof.
(b) The Bridge Notes may not be transferred except upon the conditions
specified in this Section 11(b), which conditions are intended to insure
compliance with the provisions of the Securities Act of 1933, as amended
(the "Securities Act"). Prior to any proposed transfer of this Bridge Note
the Holder hereof shall give written notice to the Company of the proposed
disposition and shall furnish to the Company a statement of the
circumstances surrounding the proposed disposition and an opinion of
counsel reasonably satisfactory to the Company to the effect that (i) such
disposition will not require registration of such securities under the
Securities Act or qualification of such securities under the blue sky or
state securities laws of any state in which such qualification would be
required, or (ii) appropriate action necessary for compliance with the
Securities Act or the blue sky or securities laws of such states has been
taken. The Holder hereof shall cause any proposed transferee of such
securities to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 11. The
Company or any co-registrar appointed by the Company may require the Holder
to furnish appropriate endorsements and/or transfer documents, including
information regarding any proposed transferee's name, address and social
security or taxpayer identification number, and to pay any issue or
transfer taxes or fees as may be required by law. The registered Holder of
this Bridge Note may be treated as its owner for all purposes.
(c) If Xxxxxx claims this Bridge Note has been lost, destroyed, or
wrongfully taken, the Company shall issue a replacement Bridge Note upon
(i) receipt of any indemnity bond or other assurance requested by the
Company to protect it from any loss which it may suffer by reason of such
replacement or subsequent presentment of the original Bridge Note, and (ii)
payment of any expenses reasonably incurred by the Company in replacing the
Bridge Note.
Section 12. Amendments and Waivers. This Bridge Note may, with the consent
of the Company and the Holder be amended or any provision thereof waived.
Section 13. Notice. Any notice or communication hereunder shall be in
writing and delivered by first-class mail, return receipt requested, to each
Holder at its address shown in the register kept by the Company or any
co-registrar appointed by the Company and to the Company at the address of its
office to be maintained pursuant to Section 2. Failure to mail, or any defect
in, a notice or communication to any other Holder of this Bridge Note shall not
affect its sufficiency with respect to the other Holders. If a notice or
communication is mailed to Holder in the manner provided above within the time
prescribed, it shall be deemed duly given and effective on the tenth (10th)
business day after it was deposited in the mail, whether or not Holder actually
receives it.
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Section 14. No Recourse Against Others. A director, officer, employee, or
shareholder, as such, of the Company shall not have any liability for any
obligations of the Company under this Bridge Note or for any claim based on, in
respect of or by reason of such obligations or their creation. The Holder of
this Bridge Note by accepting this Bridge Note waives and releases all such
liability and such waiver and release are part of the consideration for the
issue of the Bridge Note.
Section 15. Governing Law. The Bridge Notes shall be governed by and
construed in accordance with the laws of the State of New York, irrespective of
the choice of law provisions thereof. The parties agree that any appropriate
state court located in New Castle County, Delaware, or any Federal Court located
in Wilmington, Delaware, including without limitation to the United States
District Court of Delaware, shall have exclusive jurisdiction of any case or
controversy arising under or in connection with this Agreement and shall be a
proper forum in which to adjudicate such case or controversy. The parties
consent to the jurisdiction of such courts.
IN WITNESS WHEREOF, the parties have caused this Secured Convertible Bridge
Financing Note to be duly executed as of day and year first above written.
[Signatures on the following page]
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COMPANY SIGNATURE PAGE
TO
SERIES 1 BRIDGE FINANCING NOTE
COMPOSITECH, LTD.
By: __________________________________________
Xxxxxx X. Xxxxx, Chief Financial Officer
ATTEST:
By: ___________________________________
Assistant Secretary
[Corporate Seal]
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