THIS NOTE
AND THE SHARES ISSUABLE ON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAW. THE
NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NEITHER THIS NOTE NOR ANY
SHARES ISSUABLE ON CONVERSION HEREOF MAY BE TRANSFERRED, SOLD OR
OFFERED FOR SALE, IN WHOLE OR IN PART, UNLESS (1) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITY UNDER THE
SECURITIES ACT AND QUALIFICATION UNDER ANY APPLICABLE STATE
SECURITIES LAW, (2) SUCH TRANSFER IS MADE IN COMPLIANCE WITH
RULE 144 UNDER THE SECURITIES ACT AND PURSUANT TO QUALIFICATION
UNDER ANY APPLICABLE STATE SECURITIES LAW OR EXEMPTION THEREFROM,
OR (3) THERE IS AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED
AS TO SAID TRANSFER, SALE OR OFFER.
Convertible Note Due
February 26, 2014
FOR VALUE
RECEIVED , GeneLink,
Inc., a Pennsylvania corporation (the “Company”) with
its principal place of business at 317 Wekiva Springs Road, #200,
Longwood, FL 32779, hereby promises to pay to
, with its principal place of business at
(“Holder”) the amount of
Dollars ($
) (the “Principal Sum”), together with interest as
hereinafter provided and payable at the times and in the manner
hereinafter provided.
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1.
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Notes . This Note is one of a series of
notes (the “Notes”) of like tenor in the aggregate
principal amount of up to One Million Five Hundred Thousand Dollars
($1,500,000.00), all of which shall be ranked pari passu
with one another.
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2.
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Interest . Interest will accrue on the unpaid
balance of the Principal Sum until paid at the rate of eight
percent (8%) per annum from the date hereof through
February 26, 2011 and at the rate of ten percent (10%) per
annum thereafter, compounded annually. All interest shall be
calculated on the basis of a 365-day year for the actual number of
days the Principal Sum or any part thereof remains
unpaid.
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3.
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Payment Amount and Due
Date . The
Principal Sum and accrued and unpaid interest shall be payable in
full on February 26, 2014, unless the Principal Sum and unpaid
interest has been earlier converted pursuant to Section 5
below. Payment shall be made at the address designated by Holder in
writing to Company, and shall be in lawful money of the United
States of America.
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1
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4.
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Prepayment . No portion of the Principal Sum or
interest thereon shall be pre-payable by the Company without the
prior written consent of Holder.
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5.
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Conversion .
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5.1
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Except as set forth in
Section 5.4 below, this Note shall not be convertible into
shares of the common stock of the Company, par value $.01 per share
(“Common Stock”), prior to the earlier of
(a) August 26, 2009 or (b) such time as the
shareholders of the Company authorize an amendment (the
“Proposed Amendment”) to the Articles of Incorporation
(which Proposed Amendment is then adopted and filed with the
Secretary of the Commonwealth of Pennsylvania) of the Company
(“Articles”) increasing the duly authorized capital
stock of the Company to an amount of shares so that there is a
sufficient number of authorized and unissued shares of Common Stock
to issue shares of Common Stock to each holder of the Notes upon
full conversion of all Notes, and exercise of all warrants issued
in connection with the making of the Notes (the
“Warrants”), but in no event less than 175,000,000
shares of Common Stock (the “Initial Conversion
Date”).
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5.2
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At
any time on or after the Initial Conversion Date and prior to the
repayment of this Note, Holder shall, acting in its sole
discretion, be entitled to convert any portion or all of the
Principal Sum and unpaid interest accrued under this Note into
shares of Common Stock of the Company (the “Conversion
Shares”) at a price per share of $0.10 (the “Conversion
Price”). In the event of any partial conversion of this Note,
upon Holder’s surrender of this Note or any subsequent note
issued hereunder, the Company shall issue a replacement note with
identical terms, reflecting the remaining outstanding balance on
this Note.
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5.3
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If
at any time on or after the Initial Conversion Date the closing
price of the Common Stock of the Company on the Nasdaq OTC Bulletin
Board or on any exchange on which the Common Stock of the Company
is listed equals or exceeds $0.50 per share (the “Trigger
Price”) for thirty (30) consecutive trading days (the
“Conversion Event”), then the Company shall provide
Holder with a written notice stating the that the requirements for
automatic conversion under this Section 5.3 have been met,
whereupon on the fifth (5 th ) business day following
Holder’s receipt of such notice, all of the Principal Sum and
unpaid interest accrued under this Note (accruing through but not
after the occurrence of the Conversion Event) shall automatically
convert into shares of Common Stock of the Company at the
Conversion Price.
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5.4
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Notwithstanding anything in this
Note to the contrary, at the option of the Holder, any portion or
all of the Principal Sum and unpaid interest accrued under this
Note may be converted into Common Stock of the Company at the
Conversion Price upon the occurrence of a Change in Control Event,
whether occurring before or after the Initial Conversion Date. For
purposes of this Agreement, a “Change in Control Event”
shall occur upon (a) the beneficial ownership (determined in
accordance with Rule 13d-3 under the Securities Exchange Act
of
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1934, as amended (the
“Exchange Act”)) of shares of the Company’s
Common Stock being acquired by any Person (as used in
Sections 13 or 14 of the Exchange Act), who thereby becomes
the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the issued and outstanding shares
of the Company’s Common Stock; (b) the consummation of a
merger, consolidation, reorganization or similar corporate
transaction which has been approved by the shareholders of the
Company, whether or not the Company is the surviving corporation in
such transaction, other than a merger, consolidation, or
reorganization that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty
percent (50%) of the combined voting power of the voting securities
of the corporation (or such surviving entity) outstanding
immediately after such merger, consolidation, or reorganization ;
or (c) the approval by the shareholders of the Company of
(i) the sale or other disposition of all or substantially all
of the assets of the Corporation or (ii) a complete
liquidation or dissolution of the Company.
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5.5
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Notwithstanding anything in this
Note to the contrary, except in connection with a Change in Control
Event pursuant to which holders of the Common Stock have the right
to receive, or may elect to receive, a cash payment in exchange for
shares of Common Stock, Holder shall only be entitled to convert
such portion of the Principal Sum and unpaid interest accrued under
this Note that would result in Holder and its affiliates owning no
more than 9.9% of the then outstanding number of shares of Common
Stock of the Company, and Holder shall not be entitled to convert
at such time any remaining balance of this Note without the prior
consent of the Company. Nothing herein shall restrict a subsequent
conversion of any portion of this Note not then converted at a time
when such conversion shall be in conformance with this
provision.
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6.1
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The
Principal Sum plus all accrued and unpaid interest shall
immediately become due and payable at the option of Holder without
demand for payment, notice of nonpayment, notice of dishonor,
protest, notice of protest, or any other notice or demand, all of
which the Company hereby expressly waives, if any of the following
occur (each a “Default”), provided that solely with
respect to a Default pursuant to Section 6.1.9 and provided that
the Company has exerted good faith efforts in diligently
recommending and pursuing the approval of the Proposed Amendment,
Holder may not exercise its rights under this Section 6.1 for
a period of three (3) months following the occurrence of such
default:
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6.1.1
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The
Company fails to pay to Holder the Principal Sum and accrued and
unpaid interest when due as provided in this Note and such failure
continues for a period of five (5) days;
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3
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6.1.2
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The
Company voluntarily makes an assignment for the benefit of
creditors, or a trustee or receiver of the Company is
appointed;
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6.1.3
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(i) Any proceeding involving
the Company is voluntarily commenced by the Company under any
bankruptcy, reorganization, insolvency, readjustment of debt,
marshalling of assets and liabilities, dissolution, or liquidation
law or statute of the United States or of any state, whereupon such
Default shall be deemed to exist immediately upon commencement
without any cure period or (ii) a proceeding of such nature is
involuntarily instituted against the Company, and the Company by
any action indicates its approval of, or consent to or acquiescence
in, the proceeding, or the proceeding remains undismissed for sixty
(60) days;
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6.1.4
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The
failure of the Company to comply with any covenant contained in
this Note, the Warrant to purchase shares of Common Stock issued to
Holder, dated as of the date hereof (the “Warrant”), or
the Subscription Agreement between the Holder and the Company,
dated as of the date hereof (collectively the “Subscription
Documents”), and the continued failure for a period of thirty
(30) days after the Company received written notice alleging
such failure, provided that notwithstanding any provision herein,
any breach of Section 8.2.2 or that such default shall be
deemed an immediate Default without any cure period;
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6.1.5
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In
the event that any representation or warranty made in the
Subscription Documents was untrue or misleading in any material
respect when made;
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6.1.6
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The
Company fails to issue Common Stock issuable to Holder upon
Holder’s valid conversion of this Note;
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6.1.7
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Any
default by the Company with respect to another indebtedness other
than ordinary course trade debt if the effect of such default is to
cause or permit the acceleration of such indebtedness and such
indebtedness is in excess of $250,000;
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6.1.8
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The
entry of a final non-appealable judgment against the Company in an
amount in excess of $250,000 if judgment is not discharged within
thirty (30) days of the entry thereof;
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6.1.9
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The
Company failing to (i) recommend the Proposed Amendment to the
Company’s shareholders, or (ii) obtain Shareholder
approval of the Proposed Amendment and file the Proposed Amendment
with the Secretary of the Commonwealth of Pennsylvania on or before
August 26, 2009;
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6.1.10
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(i) The issuance by the Company
of Common Stock or securities convertible into or rights to
purchase, Common Stock, or (ii) the making of any change to
any such securities that are outstanding, which would, directly or
indirectly, reduce the number of authorized shares of
Common
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4
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Stock reserved or available for
issuance upon conversion of this Note or exercise of the
Warrant.
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6.1.11
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The
waiver, termination, or modification of agreements restricting the
individuals whose names are set forth on Schedule A
hereto from exercising or converting, as the case may be, any
options, warrants, or convertible securities held by such
individuals with respect to the Common Stock (“Convertible
Securities”) in a manner which could result in there being
less than an adequate number of authorized shares of Common Stock
available for issuance upon full conversion of the Notes or full
exercise of the Warrants (“Lockup
Agreements”).
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6.2
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Upon the occurrence and during the
continuance of a Default, the Holder shall then, or at any time
thereafter, have all of the rights and remedies afforded under all
other applicable law. All such rights and remedies are cumulative
and none is exclusive. In the event that the Holder or any
subsequent holder of this Note shall, in connection with the
occurrence of a Default, exercise or endeavor to exercise any of
its remedies under this Note, the Company shall pay on demand all
reasonable costs and expenses incurred in connection therewith
including, without limitation, reasonable attorneys’ fees,
a
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