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NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE HAS BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND SUCH
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR STATE LAW
OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
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US$[________]
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May
30, 2008
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GENESIS PHARMACEUTICALS ENTERPRISES, INC.
6% CONVERTIBLE NOTES DUE MAY , 2011
FOR
VALUE RECEIVED, Genesis Pharmaceuticals Enterprises, Inc., a
Florida corporation (the “Company”), hereby
promises to pay to the order of Pope Investments, LLC, a
Delaware limited liability company, or registered assigns (the
“
Holder ”),
the principal amount of _______ United States dollars
(US$_________) on May 30, 2011 (“
Maturity Date ”).
Interest on the outstanding principal balance shall be paid at the
rate of six percent (6%) per annum, in semi-annual installments
payable on November 30th and May 30th of each year, to the
holder of record of this Note on the 15
th day
of such month, with the first interest payment being due on
November 30, 2008. Interest shall be computed on the basis of a
360-day year, using the number of days actually elapsed. This Note
is issued pursuant to a Securities Purchase Agreement (the
“
Agreement ”)
dated May 30, 2008, by and among the Company, Karmoya International
Ltd., a British Virgin Islands company, Genesis Jiangbo (Laiyang)
Biotech Technologies Co., Ltd., a wholly owned foreign enterprise
in the People’s Republic of China, Mr. Wubo Cao and the
Investors named therein pursuant to which the Company issued Notes
in the aggregate principal amount of US$30,000,000. The Notes
issued pursuant to the Agreement which are outstanding at any time
are collectively referred to as the “Notes.” All terms
defined in the Agreement and used in the Notes, unless otherwise
defined in the Notes, shall have the same meaning in the Notes as
in the Agreement.
Article
1.
Covenants of the Company
(a)
Payment of Principal and Interest .
The Company shall pay principal and interest in the amounts and at
the times set forth in this Note.
(b)
Fundamental Transaction .
The Company shall not enter into any agreement with respect to
Fundamental Transaction, as hereinafter defined, without the prior
approval of the holders of a majority of the principal amount of
the Notes.
Article
2.
Events of Default; Acceleration
(a)
Events of Default Defined .
“Event of Deault”, whenever used herein, means any one
or more the following events shall have occurred (for any reason
whatsoever and whether such happening shall be voluntary or
involuntary or be affected or come about by operation of law
pursuant to or in compliance with any judgment, decree, or order of
any court or any order, rule or regulation of any administrative or
governmental body) and be continuing:
(i)
if
failure shall be made in the payment of the principal when and
as the same shall become due; or
(ii)
if
failure shall be made in the payment of interest on the Note
when and as the same shall become due and such failure shall
continue for a period of five (5) business days after such
payment is due; or
(iii)
An
event of default shall occur at any time under the terms of
any other agreements involving borrowed money in excess of One
Million Dollars (US$1,000,000) under which the Company or any
Subsidiary may be obligated as a borrower or guarantor and
such event of default permits the acceleration of such
borrowed money; or
(iv)
if
any court or agency of the government of the Peoples’
Republic of China shall make a final determination that the
PRC Agreements (as defined in the November Securities Purchase
Agreement) are not valid and enforceable agreement and such
determination results if the Company not being able to realize
in any material respect the benefits intended to be derived
from the PRC Agreements and the Company is not able to
restructure the PRC Agreements or enter into new agreement
that provide the Company with substantially the benefits
contemplated by the PRC Agreements; or
(v)
if
the Company shall violate or breach any of the
representations, warranties and covenants contained in the
Notes or the Agreement and such violation or breach shall
continue for thirty (30) days after written notice of such
breach, setting forth in reasonable detail the nature of the
breach, shall have been received by the Company from the
Holder; or
(vi)
if
the Company or any Significant Subsidiary (which term shall
mean any subsidiary of the Company which would be considered a
significant subsidiary, as defined in Rule 1-02 of Regulation
S-X of the SEC and shall include each of the Related
Companies) shall consent to the appointment of a receiver,
trustee or liquidator of itself or of a substantial part of
its property, or shall admit in writing its inability to pay
its debts generally as they become due, or shall make a
general assignment for the benefit of creditors, or shall file
a voluntary petition in bankruptcy, or an answer seeking
reorganization in a proceeding under any bankruptcy law (as
now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against the Company
or any Significant Subsidiary, in any such proceeding, or
shall by voluntary petition, answer or consent, seek relief
under the provisions of any other now existing or future
bankruptcy or other similar law providing for the
reorganization or winding up of corporations, or an
arrangement, composition, extension or adjustment with its or
their creditors, or shall, in a petition in bankruptcy filed
against it or them be adjudicated a bankrupt, or the Company
or any Significant Subsidiary or their directors or a majority
of its stockholders shall vote to dissolve or liquidate the
Company or any Significant Subsidiary other than a liquidation
involving a transfer of assets from a Subsidiary to the
Company or another Subsidiary; or
(vii)
if
an involuntary petition shall be filed against the Company or
any Significant Subsidiary seeking relief against the Company
or any Significant Subsidiary under any now existing or future
bankruptcy, insolvency or other similar law providing for the
reorganization or winding up of corporations, or an
arrangement, composition, extension or adjustment with its or
their creditors, and such petition shall not be vacated or set
aside within ninety (90) days from the filing thereof;
or
(viii)
if
a court of competent jurisdiction shall enter an order,
judgment or decree appointing, without consent of the Company
or any Significant Subsidiary, a receiver, trustee or
liquidator of the Company or any Significant Subsidiary, or of
all or any substantial part of the property of the Company or
any Significant Subsidiary, or approving a petition filed
against the Company or any Significant Subsidiary seeking a
reorganization or arrangement of the Company or any
Significant Subsidiary under the Federal bankruptcy laws or
any other applicable law or statute of the United States of
America or any State thereof, or any substantial part of the
property of the Company or any Significant Subsidiary shall be
sequestered; and such order, judgment or decree shall not be
vacated or set aside within ninety (90) days from the date of
the entry thereof; or
(ix)
if,
under the provisions of any law for the relief or aid of
debtors, any court of competent jurisdiction shall assume
custody or control of the Company or any Significant
Subsidiary or of all or any substantial part of the property
of the Company or any Significant Subsidiary and such custody
or control shall not be terminated within ninety (90) days
from the date of assumption of such custody or
control;
(x)
if,
as of August 31, 2008, the Company shall not have increased
the number of authorized shares of the Common Stock to
900,000,000 shares; or
(xi)
if
the Company breaches its obligations under Section 4.20(d) of
the Purchase Agreement.
(b)
Rights of Holder upon Default .
Upon the occurrence of an Event of Default, the entire unpaid
principal amount of this Note, together with interest thereon
shall, on written notice to the Company given by the Holders of a
majority of the principal amount of the Notes then outstanding,
become and be due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly
waived. Upon the occurrence and during the continuance of an Event
of Default, the interest rate on the Note shall be sixteen percent
(16%) per annum, payable on a semi-annual basis, accreted from the
par value of the Note. In addition to the foregoing remedy, upon
the occurrence or existence of any Event of Default, the Holders of
a majority of the principal amount of the Notes then outstanding
may exercise any other right power or remedy permitted to them by
law, either by suit in equity or by action at law, or both. Such
acceleration may be rescinded and annulled by Holders of a majority
of the principal amount of the Notes then outstanding at any time
prior to payment hereunder and the Holder shall have all rights as
a holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section 2(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
(c)
Limited Guaranty .
Genesis Jiangbo (Laiyang) Biotech Technologies Co., Ltd., a limited
liability company organized under the laws of the People’s
Republic of China and Karmoya International Ltd., a British Virgin
Islands company (collectively, the “Guarantors”), by
execution of this Note, do hereby jointly and severally acknowledge
that they and each of them will be a direct beneficiary of the
financing provided by these Notes and, as an inducement to Holder
to purchase the Notes, they do hereby jointly and severally
guarantee the payment of the Company’s obligations under this
Note to Holder promptly upon demand therefore by the Holders of a
majority of the Notes then outstanding, but if only if this Note
shall become due and payable following an Event of Default pursuant
to Section 2(a)(iii) of this Note. This guaranty is a continuing
guarantee and shall remain in full force and effect until the
Company’s obligations under this Note shall have been fully
and irrevocably paid, discharged or satisfied in full regardless of
any intermediate payment or discharge in part. The obligations of
the Guarantors under this guarantee will not be affected by any
act, omission, matter or thing which, but for this provision, would
reduce, release or prejudice any of its obligations under this
guarantee or prejudice or diminish those obligations in whole or in
part. All payments by the Guarantors under this guarantee shall be
made to the Holder of this Note to its account at such office or
bank whose main office is located in the United States of America
as the Holder may notify to the Guarantors for this purpose, and
Guarantors covenant to take such action and seek such consents as
are necessary to make such payments in US Dollars to the Holder as
contemplated hereby. All payments made by the Guarantors under this
guarantee shall be made without set-off or
counterclaim.
(d)
Rights of Note Holder .
Nothing in this Note shall be construed to modify, amend or limit
in any way the right of the Holder of this Note to bring an action
against the Company.
Article
3.
Conversion
(a)
Conversions at Option of Holder .
This Note shall be initially convertible, in whole at any time or
in part from time to time into such number of shares of Common
Stock as is determined by dividing the amount of principal being
converted by the Conversion Price. The Conversion Price shall be
twenty cents (US$.20), subject to adjustment as provided in this
Article 3.
(b)
Automatic Conversion .
Upon and subject to the satisfaction of each of the conditions set
forth in the next sentence of this Article 3(b), all or any part of
the outstanding principal of this Note may be converted at the
option of the Company at any time into shares of Common Stock. This
Note may be convertible at the option of the Company if all of the
following four conditions are met: (i) a Registration Statement or
Registration Statements with respect to all Conversion Shares and
Warrant Shares (each as defined in the Registration Rights
Agreement) shall have been declared effective (ii) the VWAP of the
Common Stock on its principal trading market has been equal to or
greater than 250% of the Conversion Price (as adjusted pursuant to
the terms of this Note) for 20 consecutive trading days, (iii) the
average dollar trading volume of the Common Stock on its principal
trading market for the same 20 consecutive trading days referred to
in subsection (ii) above exceeds US$500,000 and (iv) the Company
achieves 2008 Guaranteed EBT and 2009 Guaranteed EBT. Prior to the
issuance of any Conversion Shares to the Holder pursuant to an
automatic conversion under this Section 3(b), the Company shall
notify the Holder in writing of the number of shares of Conversion
Shares issuable to the Holder pursuant to such automatic conversion
and the effective date of such automatic conversion. The Conversion
Price shall be twenty cents (US$.20), subject to adjustment as
provided in this Article 3.
(c)
Mechanics of Conversion .
(i)
The
Holder of this Note shall effect conversions at the option of
the Holder by providing the Company with the form of
conversion notice attached hereto as
Annex A (a
“
Notice of Conversion ”)
executed by the Holder, together with the delivery by the Holder to
the Company of this Note, with this Note being duly endorsed in
full for transfer to the Company or with an applicable stock power
duly executed by the Holder in the manner and form as deemed
reasonable by the transfer agent of the Common Stock. Each Notice
of Conversion shall specify the principal amount of this Note to be
converted, the principal amount of this Note outstanding prior to
the conversion at issue, the principal amount of this Note owned
subsequent to the conversion at issue, and the date on which such
conversion is to be effected, which date may not be prior to the
date the Holder delivers such Notice of Conversion to the Company
by overnight delivery service or by telecopier or PDF (the
“
Conversion Date ”).
If no Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the Trading Day immediately preceding the
date that such Notice of Conversion and applicable stock
certificates are received by the Company. The calculations and
entries set forth in the Notice of Conversion shall control in the
absence of manifest or mathematical error. The principal amount of
this Note being converted in accordance with the terms of this
Section 3(c)(i) shall be canceled and may not be
reissued.
(ii)
Except
as otherwise set forth herein, not later than three Trading
Days after each Conversion Date (the “
Share Delivery Date ”),
the Company shall deliver to the Holder a certificate or
certificates which, after the Effective Date, shall be free of
restrictive legends and trading restrictions (other than those
required by the Agreement and the Securities Act) representing the
number of shares of Common Stock being acquired upon the conversion
of this Note. After the effective date of the Registration
Statement, the Company shall, upon request of the Holder, deliver
any certificate or certificates required to be delivered by the
Company under this Section electronically through the Depository
Trust Company or another established clearing Company performing
similar functions if the Company’s transfer agent has the
ability to deliver shares of Common Stock in such manner. If in the
case of any Notice of Conversion such certificate or certificates
are not delivered to or as directed by the applicable Holder by the
third Trading Day after the Conversion Date, the Holder shall be
entitled to elect by written notice to the Company at any time on
or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company
shall immediately return the this Note to the Holder.
(iii)
The
Company’s obligations to issue and deliver the
Conversion Shares upon conversion of this Note in accordance
with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to
enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged
violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares. In the
event a Holder shall elect to convert any or all of this Note,
the Company may not refuse conversion based on any claim that
such Holder or any one associated or affiliated with the
Holder of has been engaged in any violation of law, agreement
or for any other reason unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part
of this Note shall have been sought and obtained and the
Company posts a surety bond for the benefit of the Holder in
the amount of 150% of the Conversion Value of the principal
amount of the Note outstanding (
i.e. ,
the value of the shares of Common Stock issued upon conversion of
such principal amount of this Note) which is subject to the
injunction, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder to the extent it obtains judgment.
In the absence of an injunction precluding the same, the Company
shall issue Conversion Shares upon a properly noticed
conversion.
(iv)
If
the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 3(c)(ii) by a Share Delivery
Date, and if after such Share Delivery Date the Holder
purchases (in an open market transaction or otherwise) Common
Stock to deliver in satisfaction of a sale by such Holder of
the Conversion Shares which the Holder was entitled to receive
upon the conversion relating to such Share Delivery Date (a
“
Buy-In ”),
then the Company shall pay in cash to the Holder the amount by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (I) the aggregate number of shares of
Common Stock that such Holder was entitled to receive from the
conversion at issue multiplied by (II) the price at which the sell
order giving rise to such purchase obligation was executed. For
example, if the Holder purchases Common Stock having a total
purchase price of US$11,000 to cover a Buy-In with respect to an
attempted conversion of a portion of this Note with respect to
which the aggregate sale price giving rise to such purchase
obligation is US$10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
US$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief
with
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