CONVERTIBLE PROMISSORY NOTE DUE ON OR BEFORE OCTOBER 28, 2005
Exhibit 4.1
DUE ON OR BEFORE OCTOBER 28, 2005
THIS CONVERTIBLE PROMISSORY NOTE is issued by InvestNet, Inc., a Nevada corporation (the "Company"), designated as its Convertible Promissory Note, due on or before October 28, 2005 (the "CONVERTIBLE NOTE") issued pursuant to the Agreement and Plan of Reorganization dated May 13, 2005 between China Kangtai Cactus Bio-Tech Company Limited (“CKCB”), a British Virgin Islands corporation, its shareholders (“Shareholders”) and the Company (the "Reorganization Agreement").
FOR VALUE RECEIVED, the Company promises to pay (ratably as per their shareholdings in CKCB) to the Shareholders or their registered assigns (the "HOLDERS"), the principal sum of $8,070,000 on October 28, 2005, subject to payment on an earlier date due to default and accelerations, and further subject to earlier reduction in the Convertible Note balance due to conversions and amounts outstanding as provided hereunder (the "MATURITY DATE"), and to pay interest to the Holders on the aggregate unconverted and then outstanding principal amount of this Convertible Note at the rate of 5% per annum, payable on the Maturity Date as set forth herein. Interest shall be calculated on the basis of a 360-day year and shall accrue on the Maturity Date. On the Maturity Date, the Company may, in its sole discretion, pay the principal sum (and interest accrued) by issuing to the Holders 14,248,395 shares of the Company's restricted common stock, provided a required 1 for 70 reverse stock split of the common stock has been effected.
This Convertible Note is subject to the following additional provisions:
1. SUBJECT TO REORGANIZATION AGREEMENT. This Convertible Note has been issued subject to certain investment representations of the original Holders set forth in the Reorganization Agreement and may be transferred or exchanged only in compliance with the Reorganization Agreement and applicable federal and state securities laws and regulations. Prior to due presentment to the Company for transfer of this Convertible Note, the Company and any agent of the Company may treat the persons in whose names this Convertible Note is duly registered on the Convertible Note Register as the owners hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Convertible Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
2. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
(i) any default in the payment of the principal of, interest on, or liquidated damages in respect of, any Convertible Note, free of any claim of subordination, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default is not cured, if possible to cure, within 30 days of notice of such default sent by the Holder(s);
(ii) the Company or any of its subsidiaries shall commence, or there shall be commenced against the Company or any such subsidiary a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary thereof or there is commenced against the Company or any subsidiary thereof any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 60 days; or the Company or any subsidiary thereof is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or the Company or any subsidiary thereof makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or
(iii) the Company or any subsidiary thereof shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or
(iv) the Company or any subsidiary thereof shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary thereof for the purpose of effecting any of the foregoing.
(b) REMEDIES UPON DEFAULT. If any Event of Default occurs and is continuing, the full principal amount of this Convertible Note, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holders’ election, immediately due and payable in cash. The Holder(s) need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holders may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Holders at any time prior to payment hereunder and the Holders shall have all rights as Convertible Note holders until such time, if any, as the full payment under this Section shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
3. CONVERSION.
(a) CONVERSION RIGHT. At any time after the Original Issue Date until this Convertible Note is no longer outstanding, this Convertible Note shall be convertible into shares of Common Stock at the option of the Holders, in whole (and not in part) at any time and from time to time (subject to the limitations on conversion set forth in this Section 3(a) hereof). The Holders shall effect conversions by delivering to the Company the form of Notice of Conversion attached hereto as ANNEX A (a "NOTICE OF CONVERSION"), specifying therein the principal amount of Convertible Note to be converted and the date on which such conversion is to be effected (a "CONVERSION DATE"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is provided
2
hereunder. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Convertible Note in an amount equal to the applicable conversion. The Holders and the Company shall maintain records showing the principal amount converted and the date of such conversion. The Holders and any assignee, by acceptance of this Convertible Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of this Convertible Note, the principal amount of this Convertible Note may be less than the amount stated on the face hereof.
(b) UNDERLYING SHARES ISSUABLE UPON CONVERSION AND PURSUANT TO THE CONVERSION OF PRINCIPAL AMOUNT. The number of shares of Common Stock issuable upon conversion shall be 14,248,395 (post a required 1 for 70 reverse stock split) shares of the Company's restricted common stock (the "Underlying Shares").
(c) DELIVERIES UPON CONVERSION. Not later than 10 Business Days after any Conversion Date, the Company will deliver to the Holders a certificate or certificates representing the Underlying Shares representing the number of shares of Common Stock being acquired upon the conversion of Convertible Note (including, if so timely elected by the Company, shares of Common Stock representing the payment of accrued interest).
(d) ADJUSTMENTS.
(i) If the Company, at any time while the Convertible 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 Convertible Note, including interest thereon), (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 number of Underlying Shares into which this Convertible Note is convertible into shall be correspondingly adjusted by multiplying such number of shares 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 of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 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.
(ii) 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. For purposes of this Section 3, the number of shares of Common Stock deemed to be outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) outstanding on a fully diluted basis.
(e) 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, nonassessable.
3
(f) The issuance of certificates for shares of the Common Stock on conversion of the Convertible 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 of such Convertible Note so converted 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.
4. DEFINITIONS. For the purposes hereof, in addition to the terms defined elsewhere in this Convertible Note: (a) capitalized terms not otherwise defined herein have the meanings given to such terms in the Reorganization Agreement, and (b) the following terms shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, $0.001 par value per share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of the Convertible Note regardless of the number of transfers of any Convertible Note and regardless of the number of instruments which may be issued to evidence such Convertible Note.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon conversion of Convertible Note or as payment of interest in accordance with the terms hereof.
5. DEBT OBLIGATION. This Convertible Note is a direct debt obligation of the Company. This Convertible Note ranks PARI PASSU with all other Convertible Notes now or hereafter issued under the terms set forth herein.
6. REPLACEMENT OF NOTE. If this Convertible Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Convertible Note, or in lieu of or in substitution for a lost, stolen or destroyed Convertible Note, a new Convertible Note for the principal amount of this Convertible Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Convertible Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.
4
7. INTERPRETATION; CHOICE OF LAW. All questions concerning the construction, validity, enforcement and interpretation of this Convertible Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Convertible Note or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Convertible Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
8. WAIVER. Any waiver by the Company or the Holders of a breach of any provision of this Convertible Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Convertible Note. The failure of the Company or the Holders to insist upon strict adherence to any term of this Convertible Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Convertible Note. Any waiver must be in writing.
9. MISCELLANEOUS. If any provision of this Convertible Note is invalid, illegal or unenforceable, the balance of this Convertible Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Convertible Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed by a duly authorized officer as of the date first above indicated.
INVESTNET, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇
Title: Chief Financial Officer and Chairman
5