EXHIBIT 10.38
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.
SERIES 1 BRIDGE FINANCING NOTE
No. S1BFN-1 $500,000.00 March 16, 1999
COMPOSITECH LTD., a Delaware corporation (such corporation, or any
successor permitted hereunder, the "Company"), for value received, hereby
promises to pay to SOVCAP EQUITY PARTNERS, LTD., or any subsequent holder hereof
(such holders, assignees, or any registered assignees, the "Holders"), the
principal sum of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS (US $500,000.00), 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
the one hundred eightieth day after the Original Issue Date (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 Series 1 Bridge Note shall have first been issued is referred to herein as
the "Original Issue Date."
Section 1. Description. This Bridge Note is one of a series of Series 1
Bridge Financing Notes that have been authorized by the Company (the "Series 1
Bridge Notes") and are alike except for principal amount and issue date, and are
in registered form. This Series 1 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 (the "Certificate of Incorporation"). The Common Stock issuable
upon conversion of this Series 1 Bridge Note (the "Conversion Shares") are
entitled to registration rights pursuant to a Registration Rights Agreement
between Holder, the Company, and certain other signatures thereto dated March
16, 1999 (the "Registration Rights Agreement"). This Series 1 Bridge Note is
secured by certain specified equipment of the Company having a value of
approximately 200% of the principal amount of this Series 1 Bridge Note pursuant
to the terms of a Series 1 Bridge Note Purchase and Security Agreement dated
March 16, 1999 (the "Purchase Agreement"), and 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 Series 1 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 Series
1 Bridge Notes and of their transfer and exchange, including the names and
addresses of Holders of the Series 1 Bridge Notes. Holder shall give the Company
notice of any change in Holder'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 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 Series 1 Bridge Notes.
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Section 3. Redemption.
(a) Mandatory Redemption. If this Series 1 Bridge Note is outstanding on
the Maturity Date, this Series 1 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 Series 1 Bridge Note, which notice shall state the election of the
Company to pay the redemption price in cash or by conversion of this Series
1 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 Series 1 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 Series 1 Bridge Note. Such demand
shall specify Holder's election to accept payment of the redemption price
in cash or by conversion of this Series 1 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 Series 1 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 Series 1 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 Series 1 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 Series 1
Bridge Note to be redeemed, (C) the Voluntary Redemption Price, and (D) the
name and address of the Person to whom this Series 1 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 Series 1 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
Series 1 Bridge Notes to the Person specified in paragraph (ii) above for
surrender.
(v) No Voluntary Redemption of this Series 1 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 $2.34 (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 Series 1 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 Series 1 Bridge
Note (except defaulted interest) to the Person who is the registered Holder of
this Series 1 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 Series 1 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 Series 1 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 Holder'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 Series 1 Bridge Note in full, to receive such payment
Holder must surrender this Series 1 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 Series 1 Bridge Note, money sufficient to pay the Redemption
Price and all accrued and unpaid interest due under this Series 1 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
Series 1 Bridge Note into shares of Common Stock.
(b) If Holder elects to convert less than the full Redemption Price of this
Series 1 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 Series 1 Bridge Note shall also apply to
conversion of a portion of the Redemption Price. Upon surrender of the Series 1
Bridge Note for conversion in part, the Company shall issue new Series 1 Bridge
Notes in substantially the same form as this Series 1 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
Series 1 Bridge Note is equal to the quotient of the Redemption Price of this
Series 1 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
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Conversion Shares issuable upon conversion of this Series 1 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 Series 1 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 Series 1 Bridge Note being converted (or an indemnification
undertaking with respect to such shares in the case of the loss, theft, or
destruction of the Series 1 Bridge Note) and the originally executed Conversion
Notice. The date the Company receives the Conversion Note and this Series 1
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 Series 1 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 Series 1 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 Series 1 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
Series 1 Bridge Note, in addition to all other available remedies which such
Holder may pursue hereunder and under the Purchase Agreement between the Company
and the initial Holder of this Series 1 Bridge Note (including indemnification
pursuant to Section 7.18 thereof), 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
Series 1 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
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remainder required by reason of such adjustment until the occurrence of such
event, provided that the Company delivers to Holder a due xxxx or other
appropriate instrument evidencing the Holders' right to receive such additional
shares or check upon the occurrence of the event giving rise to the adjustment.
(f) Until such time as this Series 1 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 Series 1 Bridge Note at any
time. All shares of Common Stock issued upon conversion of this Series 1 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 Series 1 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 Series 1 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 Series 1 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 7b) 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.
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Section 8. Notices. The Company shall give the following notices at the
times specified:
(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
Series 1 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 Series 1 Bridge Note
with the same effect as if the Successor Corporation had been named as the
Company herein. Nothing in this Series 1 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 Series 1 Bridge Note, the Purchase Agreement, the Warrant, the
Repricing Warrant, 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 Series 1 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 Series 1
Bridge Note to be due and payable, and this Series 1 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 Series 1 Bridge Note the then outstanding principal of and accrued and
unpaid interest on the Series 1 Bridge Notes. If at any time after acceleration
of the maturity of the Series 1 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 Series 1
Bridge Notes) and all Events of Default (other than nonpayment of principal of
or interest on this Series 1 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.
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(c) A delay or omission by the Holder of this Series 1 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.
(d) If any Event of Default shall occur and be continuing, the Holder of
this Series 1 Bridge Note may proceed to protect and enforce their rights under
this Agreement and this Series 1 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 Series 1 Bridge Note may be exchanged for an equal principal
amount of Series 1 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 Series 1 Bridge Note to the Company or to an agent designated
for that purpose. Any Series 1 Bridge Notes issued in exchange for this Series 1
Bridge Note shall be one of this Series 1 Bridge Note referred to in Section 1,
and shall be entitled to all the rights thereof.
(b) The Series 1 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 Series 1 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 Series 1
Bridge Note may be treated as its owner for all purposes.
(c) If Holder claims this Series 1 Bridge Note has been lost, destroyed, or
wrongfully taken, the Company shall issue a replacement Series 1 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 Series 1 Bridge Note, and
(ii) payment of any expenses reasonably incurred by the Company in replacing the
Series 1 Bridge Note.
Section 12. Amendments and Waivers. This Series 1 Bridge Note may, with the
consent of the Company and the Holder be amended or any provision thereof
waived.
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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 Series 1 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.
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 Series 1 Bridge Note or for any claim
based on, in respect of or by reason of such obligations or their creation. The
Holder of this Series 1 Bridge Note by accepting this Series 1 Bridge Note
waives and releases all such liability and such waiver and release are part of
the consideration for the issue of the Series 1 Bridge Note.
Section 15. Governing Law. The Series 1 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 Series 1 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:
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Xxxxxx X. Xxxxx, Chief Financial Officer
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