GENESIS PHARMACEUTICALS ENTERPRISES, INC. 6% CONVERTIBLE NOTES DUE MAY , 2011
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.
|
US$[________]
|
May
30, 2008
|
6%
CONVERTIBLE NOTES DUE MAY , 2011
FOR
VALUE
RECEIVED, Genesis Pharmaceuticals Enterprises, Inc., a Florida corporation
(the
“Company”), hereby promises to pay to the order of ▇▇▇▇ Investments, LLC, a
Delaware limited liability company, or registered assigns (the “Holder”),
the
principal amount of _______ United States dollars (US$_________) 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 15th
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.
▇▇▇▇ ▇▇▇ 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
2
(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.
3
(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.
4
(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.
5
(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 ▇▇▇▇▇▇’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
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required pursuant to
the
terms hereof.
6
(d) Reservation
of Share of Common Stock.
The
Company covenants that it will at all times reserve and keep available out
of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Note, as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than
the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of
such
shares set forth in the Agreement) be issuable upon the conversion of this
Note.
The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
non-assessable.
(e) Fractional
Shares.
Upon a
conversion hereunder, the Company shall not be required to issue stock
certificates representing fractions of shares of the Common Stock. All
fractional shares shall be carried forward and any fractional shares which
remain after the Holder converts the full principal amount of this Note shall
be
dropped and eliminated.
(f) Transfer
Taxes.
The
issuance of certificates for shares of the Common Stock on conversion of this
Note shall be made without charge to the Holders thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to pay
any
tax that may be payable in respect of any transfer involved in the issuance
and
delivery of any such certificate upon conversion in a name other than that
of
the Holder, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
(g) Absolute
Obligation.
Except
as expressly provided herein, no provision of this Note shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay
the
liquidated damages (if any) on, this Note at the time, place, and rate, and
in
the coin or currency, herein prescribed.
(h) Certain
Adjustments.
(i) Stock
Dividends and Stock Splits.
If the
Company, at any time from and after the Closing Date, while this Note is
outstanding: (A) shall pay a stock dividend or otherwise make a distribution
or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance
of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Note), (B) subdivide outstanding shares of Common Stock into
a
larger number of shares, (C) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (D)
issue
by reclassification of shares of the Common Stock any shares of capital stock
of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and the denominator
shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section
3(h)(i) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case
of a
subdivision, combination or re-classification.
7
(ii) Issuance
of Common Stock Equivalents.
If the
Company, at any time while this Note is outstanding, issues Common Stock
Equivalents to holders of shares of Common Stock entitling them to subscribe
for
or purchase shares of Common Stock at a price per share (or a conversion price
per share) less than the Conversion Price on the date of issuance of such Common
Stock Equivalents, the Conversion Price shall be decreased by multiplying the
Conversion Price in effect immediately prior to the such date of issuance by
a
fraction, of which: (A) the numerator shall be the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issuance, plus
(y)
the total number of shares of Common Stock that the aggregate offering price
of
the total number of shares of Common Stock offered for subscription or purchase
(or the aggregate conversion price of such Convertible Securities) would
purchase at the Conversion Price on the date of such issuance; and (B) the
denominator shall be the sum of (x) the number of shares of Common Stock
outstanding immediately prior to such issuance, plus (y) the number of
additional shares of Common Stock offered for subscription or purchase (or
into
which such Convertible Securities could be converted). For purposes of this
Section, the term “Common
Stock Equivalents”
shall
mean means any rights, warrants or options to subscribe for or purchase shares
of Common
Stock or
securities convertible into or exercisable for shares of Common
Stock.
(iii) Cash
Dividends or Distributions
If the
Company, at any time while this Note is outstanding, makes a dividend or
distribution consisting exclusively of cash to holders of the Common Stock,
the
Conversion Price shall be decreased by multiplying the Conversion Price in
effect on the record date for the determination of shareholders entitled to
such
distribution by a fraction, of which: (A) the numerator shall be the Conversion
Price on such record date less the amount of cash to be distributed per share
of
Common Stock; and (B) the denominator shall be the Conversion Price on such
record date.
(iv) Repurchases
If the
Company, at any time while this Note is outstanding, makes a payment in respect
of a repurchase (including by way of a tender or an exchange offer) of shares
of
Common Stock the consideration for which exceeds the Conversion Price
immediately prior to the announcement of such repurchase, the Conversion Price
shall be decreased by multiplying the Conversion Price in effect immediately
prior to the announcement of such repurchase by a fraction, of which: (A) the
numerator shall be (x) the total number of shares of Common Stock outstanding
on
the date immediately prior to the announcement of such repurchase multiplied
by
the Conversion Price as of such date, minus (y) the aggregate consideration
paid
in connection with such repurchase; and (B) the denominator shall be the number
of shares of Common Stock outstanding on the date immediately prior to the
announcement of such repurchase, minus the total number of shares of Common
Stock repurchased.
8
(v) Pro
Rata Distributions
If the
Company, at any time while this Note is outstanding, distributes to all holders
of Common Stock (and not to the Holders) evidences of its indebtedness, or
any
other securities or other assets (other than stock dividends described in
subsection (i) above, Common Stock Equivalents described in subsection (ii)
above and dividends and distributions paid exclusively in cash described in
subsection (iii) above) then in each such case the Conversion Price shall be
decreased by multiplying such Conversion Price in effect immediately prior
to
the record date fixed for determination of stockholders entitled to receive
such
distribution by a fraction of which the denominator shall be the Conversion
Price determined as of the record date for such distribution, and of which
the
numerator shall be such Conversion Price on such record date less the then
fair
market value at such record date of the portion of such assets or evidence
of
indebtedness so distributed applicable to one (1) outstanding share of the
Common Stock as determined by the Board of Directors of the Company in good
faith. Such adjustment shall be made whenever any such distribution is made
and
shall become effective immediately after the record date mentioned above.
(vi) Price
Adjustment.
From
and after the Closing Date and until such time as this Note is no longer
outstanding, except for (a) Exempt Issuances, (b) issuances covered by Sections
3(h) of this Note, or (c) an issuance of Common Stock upon exercise or upon
conversion of warrants, options or other convertible securities for which an
adjustment has already been made pursuant to this Section 3(h) of this Note,
if
the Company closes on the sale or issuance of Common Stock at a price, or issues
Convertible Securities with a conversion price or exercise price per share
which
is less than the Conversion Price then in effect (such lower sales price,
conversion or exercise price, as the case may be, being referred to as the
“Lower
Price”),
the
Company shall issue to and each Holder shall receive such number of additional
shares of the Common Stock equal to the quotient of such Holder’s Investment
Amount divided by the Lower Price less the number of Notes such Investor
received on the Closing Date.
(i) Calculations.
All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.
(j) Notice
to Holders.
(i) Adjustment
to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to this Section 3, the
Company shall promptly mail to each Holder a notice setting forth the adjustment
and setting forth a brief statement of the facts requiring such adjustment.
If
the Company issues a variable rate security the Company shall be deemed to
have
issued Common Stock or Common Stock equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised.
9
(ii) Notices
of Other Events.
If (a)
the Company shall declare a dividend (or any other distribution) on the Common
Stock; (b) the Company shall declare a redemption of the Common Stock; (c)
the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (d) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock
or
any Fundamental Transaction, (e) the Company shall authorize the voluntary
or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Note, and shall
cause
to be mailed to the Holder of this Note at such Holder’s last addresses as it
shall appear upon the stock books of the Company, at least twenty (20) calendar
days prior to the applicable record or effective date hereinafter specified,
a
notice stating (x) the date on which a record is to be taken for the purpose
of
such dividend, distribution, redemption, rights or warrants, or if a record
is
not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification is expected
to become effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property deliverable upon
such
reclassification or Fundamental Transaction; provided, that the failure to
mail
such notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such
notice.
(iii) Exempt
Issuance
Notwithstanding anything set forth in this Note, no adjustment in the Conversion
Price will be made in respect of an Exempt Issuance. For purposes of this Note,
the term “Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers,
directors of and consultants (other than consultants whose services relate
to
the raising of funds) of the Company pursuant to any stock or option plan that
was or may be adopted by a majority of independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose, and approved by a majority
of the Company’s stockholders; provided that (i) no options are granted at a
price which is less than the fair market value on the date of grant and (ii)
no
more than such number of shares of Common Stock as represents 5% of the then
outstanding shares of Common Stock shall be included in the definition of Exempt
Issuances; (b) securities upon the exercise of or conversion of any Notes or
Warrants and any other options, warrants, convertible debentures or other
convertible securities which are outstanding on the date hereof including the
Debentures and the November Warrants, and (c) securities issued pursuant to
acquisitions, licensing agreements, or other strategic transactions, provided
any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business which the Company’s board of
directors believes is beneficial to the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities
10
(k) Fundamental
Transaction.
If, at
any time while this Note is outstanding, (A) the Company effects any merger
or
consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”),
then
upon any subsequent conversion of this Note, the Holder shall have the right
to
receive, for each Conversion Share that would have been issuable upon such
conversion absent such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive upon
the
occurrence of such Fundamental Transaction if it had been, immediately prior
to
such Fundamental Transaction, the holder of one share of Common Stock (the
“Alternate
Consideration”).
For
purposes of any such conversion, the determination of the Conversion Price
shall
be appropriately adjusted to apply to such Alternate Consideration based on
the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration
it
receives upon any conversion of this Note following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions,
any
successor to the Company or surviving entity in such Fundamental Transaction
shall assume this Note.
(l) Ownership
Limitation
Notwithstanding
anything set forth in this Note, the Company shall not effect any conversion
of
this Note, and a Holder shall not have the right to convert any portion of
this
Note, to the extent that after giving effect to such issuance after exercise,
such Holder (together with such Holder’s affiliates, and any other person or
entity acting as a group together with such Holder or any of such Holder’s
affiliates), as set forth on the applicable Notice of Conversion, would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of this Note
with
respect to which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, unconverted portion of this Note beneficially owned
by such Holder or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Holder or any of its
affiliates. Except as set forth in the preceding sentence, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder, it being acknowledged
by a Holder that the Company is not representing to such Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and such
Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section applies, the determination of whether this Note is convertible (in
relation to other securities owned by such Holder) and of which a portion of
this Note is convertible shall be in the sole discretion of a Holder, and the
submission of a Notice of Conversion shall be deemed to be each Holder’s
determination of whether this Note is convertible (in relation to other
securities owned by such Holder) and of which portion of this Note is
convertible, in each case subject to such aggregate percentage limitation,
and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of
the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section, in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock
as
reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case
may be, (y) a more recent public announcement by the Company or (z) any other
notice by the Company or the Company’s Transfer Agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of
a Holder, the Company shall within two Trading Days confirm orally and in
writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Note, by such Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock
was
reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this Note. The
Beneficial Ownership Limitation provisions of this Section may be waived by
such
▇▇▇▇▇▇, at the election of such Holder, upon not less than 61 days’ prior notice
to the date of the particular Notice of Conversion which would result in the
Holder beneficially owning shares of Common Stock in excess of the Beneficial
Ownership Limitation. The limitations contained in this paragraph shall apply
to
a successor holder of this Note.
11
Article
4.
Put
Right
(a) Right
to Require Redemption Except
as
set forth in Section 4(c) hereof, the Holder may elect by written notice to
the
Company to require the Company to redeem in cash all or a portion of this Note
at any time following the occurrence of any of the following events (i) a Change
in Control of the Company, (ii) the occurrence and continuance of an Event
of
Default hereunder and (iii) if any governmental agency in the People’s Republic
of China challenges or otherwise takes any action that directly and specifically
adversely affects the transactions contemplated by the Securities Purchase
Agreement and the Company can no undo such governmental action or otherwise
address the material adverse effect to the reasonable satisfaction of the
holders of a majority of the then outstanding principal amount of the Notes.
For
purposes of this Note, the term “Change
in Control”
means
at such time as (i) any person or group (as the term “person” or :group” is used
in Section 13(d) of the Securities Exchange Act of 1934, as amended) other
than
▇▇▇▇ ▇▇▇ has become the beneficial owner of 50% or more of the Company’s capital
stock having the power to vote for the election of directors under ordinary
circumstances (“Voting
Stock”),
(ii)
there shall be consummated any consolidation or merger of the Company (A) in
which the Company is not the continuing or surviving corporation or (B) pursuant
to which any Voting Stock of the Company would be converted into cash,
securities or other property, in each case, other than a consolidation or merger
in which the holders of such Voting Stock immediately prior thereto have at
least a majority of the Voting Stock, directly or indirectly, of the resulting
or surviving corporation immediately after the consolidation or merger, (iii)
a
sale of all or substantially all of the assets of the Company or (iv) there
shall occur the replacement at one time or within a three year period of more
than one half of the members of the Company’s Board of Directors which is not
approved by a majority of those individuals who are members of the Company’s
Board of Directors as of the date hereof (or by those individuals who are
serving as members of the Board of Directors on any date whose nomination to
the
Board of Directors was approved by a majority of the members of the Board of
Directors who are members on the date hereof).
12
(b) Redemption
Price The
redemption price with respect to this Note, if redeemed pursuant to Section
4(a)
shall be equal to 100% of outstanding principal amount of this Note plus
a yield
from the original issue date to the redemption date of 15% per annum
plus
any
accrued any unpaid interest on this Note less
any
interest including any Default Interest previously paid with respect to this
Note; provided,
however,
that
notwithstanding the foregoing, in the event that either the 2008 Make Good
Shares or the 2009 Make Good Shares are transferred to the Investors and the
Investors do not opt to return such Make Good Shares to the Company, the
redemption price with respect to this Note, if redeemed pursuant to Section
4(a)
shall be equal to 100% of outstanding principal amount of this Note plus
a yield
from the original issue date to the redemption date of 10% per annum
plus
any
accrued any unpaid interest on this Note less
any
interest including any Default Interest previously paid with respect to this
Note; and provided,
further, however,
notwithstanding anything set forth in this Section 4, in the event that both
the
2008 Make Good Shares and the 2009 Make Good Shares are transferred to the
Investors, the Holder shall have no redemption rights with respect to this
Note
unless and until the Investors return all such 2008 Make Good Shares and 2009
Make Good Shares to the Shareholder.
Article
5.
Miscellaneous
(a) Transferability.
This
Note shall not be transferred except in a transaction exempt from registration
pursuant to the Securities Act and applicable state securities law. The Company
shall treat as the owner of this Note the person shown as the owner on its
books
and records.
(b) Limited
Right of Prepayment.
The
Company shall have no right to prepay this Note without the prior written
consent of the Holder, which consent may be given or withheld by the Holder
in
its sole discretion. Any prepayment shall be accompanied by interest on this
Note to the date of prepayment.
13
(c) WAIVER
OF TRIAL BY JURY.
IN ANY
LEGAL PROCEEDING TO ENFORCE PAYMENT OF THIS NOTE, THE COMPANY WAIVES TRIAL
BY
JURY.
(d) WAIVER
OF ANY RIGHT OF COUNTERCLAIM.
EXCEPT
AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT TO ASSERT ANY CLAIM
IT
MAY HAVE AGAINST THE HOLDER OF THIS NOTE BY WAY OF A COUNTERCLAIM (OTHER THAN
A
COMPULSORY COUNTERCLAIM) IN ANY ACTION ON THIS NOTE.
(e) Usury
Saving Provision.
All
payment obligations arising under this Note are subject to the express condition
that at no time shall the Company be obligated or required to pay interest
at a
rate which could subject the Holder of this Note to either civil or criminal
liability as a result of being in excess of the maximum rate which the Company
is permitted by law to contract or agree to pay. If by the terms of this Note,
the Company is at any time required or obligated to pay interest at a rate
in
excess of such maximum rate, the applicable rate of interest shall be deemed
to
be immediately reduced to such maximum rate, and interest thus payable shall
be
computed at such maximum rate, and the portion of all prior interest payments
in
excess of such maximum rate shall be applied and shall be deemed to have been
payments in reduction of principal.
(f) Notice
to Company.
Notice
to the Company shall be given to the Company at its principal executive offices,
presently located at Middle Section, Longmao Street, Area A, Laiyang
Waixiangxing Industrial Park, Laiyang City, Yantai, Shandong Province, People’s
Republic of China 710075, attention of ▇▇. ▇▇▇, Wubo, Chief Executive Officer,
with a copy to Loeb & Loeb LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq, or to such other address or person as the
Company may, from time to time, advise the holder of this Note, or to the holder
of this Note at the address set forth on the Company’s records. Notice shall be
given by hand delivery, certified or registered mail, return receipt requested,
overnight courier service which provides evidence of delivery, or by telecopier
if confirmation of receipt is given or of confirmation of transmission is sent
as herein provided.
(g) Governing
Law.
This
Note shall be governed by the laws of the State of New York applicable to
agreements executed and to be performed wholly within such state. The Company
hereby (i) consents to the exclusive jurisdiction of the United States District
Court for the Southern District of New York and Supreme Court of the State
of
New York in the County of New York in any action relating to or arising out
of
this Note, (ii) agrees that any process in any such action may be served upon
it
either (x) by certified or registered mail, return receipt requested, or by
an
overnight courier service which obtains evidence of delivery, with the same
full
force and effect as if personally served upon him in New York City or (y) any
other manner permitted by law, and (iii) waives any claim that the jurisdiction
of any such tribunal is not a convenient forum for any such action and any
defense of lack of in personam jurisdiction with respect thereto.
(h) Expenses.
In the
event that the Holder commences a legal proceeding in order to enforce its
rights under this Note, the Company shall pay all reasonable legal fees and
expenses incurred by the holder with respect thereto.
14
IN
WITNESS WHEREOF, the Company has executed this Note as of the date and year
first aforesaid.
|
By:
|
|
|
▇▇▇
▇▇▇▇, Chief Executive Officer
|
|
The
undersigned do hereby agree to the guarantee set forth in Section 2(c) of this
Note.
|
GENESIS
JIANGBO (LAIYANG) BIOTECH TECHNOLOGIES CO., LTD.
|
|
|
By:
|
|
|
Name:
▇▇▇ ▇▇▇▇
|
|
|
Title:
Chief Executive Officer
|
|
|
KARMOYA
INTERNATIONAL LTD.
|
|
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By:
|
|
|
Name:
▇▇▇ ▇▇▇▇
|
|
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Title:
Chief Executive
Officer
|
|
15
NOTICE
OF
CONVERSION
[To
be
Signed Only Upon Conversion
of
Part
or All of Notes]
The
undersigned, the holder of the foregoing Note, hereby surrenders such Note
for
conversion into shares of Common Stock of Genesis Pharmaceuticals Enterprises,
Inc. to the extent of US$ * unpaid principal amount of due on such Note, and
requests that the certificates for such shares be issued in the name of
________________, and delivered to ____________________, whose address is
___________________.
(Signature
must conform in all respects to name of holder as specified on the face of
the
Note.)
*
Insert
here the unpaid principal amount of the Note (or, in the case of a partial
conversion, the portion thereof as to which the Note is being converted). In
the
case of a partial conversion, a new Note will be issued and delivered,
representing the unconverted portion of the unpaid principal amount of this
Note, to or upon the order of the holder surrendering such
Note.
16