NEITHER THEISSUANCEANDSALE OFTHE SECURITIES REPRESENTEDBY THISNOTE NOR THE SECURITIESINTOWHICH THESE SECURITIES ARE CONVERTIBLE HAVEBEENREGISTERED UNDER THE SECURITIESACTOF 1933,ASAMENDED, ORAPPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BEOFFEREDFOR SALE, SOLD,TRANSFERRED ORASSIGNED (I)INTHE ABSENCEOF(A)ANEFFECTIVEREGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,ASAMENDED,OR(B) AN OPINION OFCOUNSEL(WHICH COUNSEL SHALLBESELECTED BY THE HOLDER),IN AGENERALLY ACCEPTABLEFORM, THAT REGISTRATIONISNOTREQUIREDUNDER SAID ACT OR(II)UNLESS SOLD PURSUANT TO RULE144 ORRULE144AUNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGEDINCONNECTIONWITH ABONA FIDE MARGIN ACCOUNT OROTHER LOAN ORFINANCING ARRANGEMENT SECURED BYTHE SECURITIES.
Principal Amount: Upto$56,500
Date: March15, 2018
PROMISSORY NOTE
Rich Pharmaceuticals,Inc.,(hereinaftercalled the “Company”),herebypromisestopay to the orderofGHSInvestments,LLC, aNevadaLimited Liability Company,or itsregistered assigns (the“Holder”)thesum of up to $56,500 on the"Maturity Date", as defined below, together withanyinterest as set forthherein, and topayinterest on theunpaid principalbalancehereof at the rate often percent (10%)(the“Interest Rate”)per annum from thedate hereof (the“IssueDate”) until thesame becomesdueand payable, whether at maturity or uponaccelerationor byprepayment orotherwise.
ThisNote isbeingissuedwith aten percent (10%) original issuance discount and with an initial
$1,500being withheld by theHolder tooffsettransaction costs. Holder shall onlyretain beneficial ownership over those amounts (andcorresponding interest(s)) which Holder has actually funded inaccordance with theschedule outlined in theSecurities Purchase Agreement ofsame Date. TheMaturity Dateforeachfunded Trancheshall benine (9)calendar monthsfrom thedatethe funds arereceived by theCompany.
ThisNote may not beprepaid inwholeor inpart exceptas otherwise explicitly setforth herein. Following any EventofDefault, all amounts owing pursuantto thisNote shallbearinterest at thelowerof (a) therate of twentypercent (20%) per annum from the duedatethereof until thesame ispaid or (b) the maximum rate allowed by law(“Default Interest”). Interest shall becomputedon thebasis of a365-dayyearand theactual number ofdayselapsed. All payments duehereunder(to theextent notconverted intocommon stock) shall bemade inlawful moneyof theUnited StatesofAmerica.
All payments shallbemade at such address astheHolder shall hereaftergive to theCompanybywritten noticemade inaccordance with theprovisionsof thisNote. Wheneveranyamount expressed to be due by theterms of thisNoteisdueonany daywhichis not abusiness day, thesame shall instead be due on thenextsucceeding day which is abusiness day and, in thecaseofanyinterest paymentdatewhich isnotthedateonwhich thisNoteispaidin full, theextension
of the duedate thereof shall not betakeninto account for purposes ofdetermining theamount ofinterest due onsuchdate.As used in thisNote,the term“business day” shall mean anyday other than aSaturday, Sunday or a day onwhichcommercial banks in the city ofNewYork,New York areauthorized orrequired bylaworexecutiveorder toremainclosed.
Eachcapitalizedtermusedherein,and nototherwise defined, shall have themeaning ascribed thereto in thesupporting documentsofsame date (attached hereto).
ThisNote is freefromall taxes,liens, claims and encumbrances with respect to theissuethereof and shall not be subject topreemptiverights orother similar rights ofshareholdersof theCompanyand will notimpose personal liabilityupon theholderthereof.
The following terms shall apply tothisNote:
ARTICLE I.CONVERSION RIGHTS
1.1 Conversion Right. TheHolder shall havetherightand at any time followingexecution of thisNote, toconvert alloranypartoftheoutstanding and unpaidprincipal amount of thisNoteinto fullypaid and non-assessableshares ofCommon Stock, as such Common Stockexistson theIssueDate,oranyshares ofcapital stockorother securities of theCompanyintowhich such Common Stock shall hereafterbechanged orreclassified at theconversion price (the“Conversion Price”) determined as providedherein (a“Conversion”);provided,however, that in noevent shall theHolder beentitled toconvertany portionofthisNote inexcess ofthat portion of thisNote uponconversionofwhich thesumof(1) thenumber ofshares ofCommon Stock beneficially owned by theHolderanditsaffiliates (otherthan shares ofCommon Stock whichmay bedeemedbeneficiallyowned through theownershipof theunconverted portion of theNotesor theunexercised orunconverted portion ofanyother security of theCompanysubject to alimitationonconversionorexerciseanalogous to thelimitations contained herein) and (2) thenumber of shares ofCommon Stock issuable upon theconversion of theportionofthisNote withrespect towhich thedeterminationof thisproviso isbeingmade,would result inbeneficial ownership by theHolderand itsaffiliatesofmore than 4.99% of theoutstanding sharesofCommon Stock. Forpurposes of theproviso to the immediatelypreceding sentence, beneficial ownership shall bedetermined inaccordance with Section 13(d) of theSecurities Exchange Actof1934,as amended (the“Exchange Act”), and Regulations13D-G thereunder. Thenumberofshares ofCommon Stockto beissued uponeach conversion ofthisNote shall bedetermined bydividingtheConversion Amount (asdefined below)by theapplicable Conversion Price thenineffect on thedate specified in thenotice ofconversion, (the“NoticeofConversion”),delivered to theCompany by theHolder inaccordance with theSections below; provided that theNoticeofConversion issubmitted byfacsimileore-mail(or byothermeans resulting in,orreasonablyexpectedtoresultin,notice) to theCompanybefore 6:00p.m., New York, New York time onsuch conversion date (the“ConversionDate”).
ThenumberofsharesofCommon Stock to beissued uponeach conversion of thisNote shall bedetermined by dividing theConversion Amount(asdefined below)by theapplicable Conversion Pricethen ineffect on thedatespecified in thenoticeofconversion, (the“NoticeofConversion”), delivered to theCompany by theHolder inaccordance with theSections below.
The term“Conversion Amount” means, with respect toanyconversionof thisNote,the sum of (1) theprincipal amount of thisNoteto beconvertedinsuch conversionplus(2)atthe
Company’soption,accruedand unpaid interest, ifany, onsuch principal amount at theinterestrates providedin thisNotetotheConversionDate,plus(3)at theCompany’soption, Default Interest, ifany, on theamounts referred to inthe immediatelypreceding clauses (1)and/or (2)plus(4)at theHolder’s option,any amounts owed to theHolder.
(a) Calculationof ConversionPrice. Holder, at itsdiscretion, shall have the right toconvertthisNote in itsentirety or inpart(s) intocommon stockof theCompany valued at aforty percent (40%)discountoffofthelowest intra-day tradingpricefor theCompany’s common stock during theten (10) trading days immediately preceding aconversion date, as reported byQuotestream Media.
Ifat any timeafter theexecutionof thisNote, theCompany experiencesa"DTC Chill," theConversionPriceDiscount shallbeincreasedbyfive percent (5%). Ifat any time following theexecution of thisNote, theCompany becomes ineligible toparticipate in theDTC's"DWAC"system, theConversionPriceDiscountwillbeincreasedby fivepercent (5%). Following any Event ofDefault,theConversion Price discountshall bepermanently increased byten percent (10%).
1.3 AuthorizedShares.TheCompanycovenantsthatduring the period theconversion rightexiststheCompanywill reserve from itsauthorized and unissued Common Stock asufficient number ofshares, freefrom preemptive rights, toprovidefor theissuanceofCommon Stock upon the fullconversionof thisNote. TheCompany is requiredatall times tohaveauthorizedand reservedthreetimes thenumber ofshares that is actuallyissuable upon full conversion of theNote(based on theConversion Price of theNotesineffect from time totime)(the “Reserved Amount”). TheReserved Amount shall beincreasedfrom time to time inaccordance with theCompany’sobligations.
TheCompanyrepresents that uponissuance, such shares will be dulyandvalidlyissued,fullypaid and non-assessable.Inaddition,iftheCompanyshallissueany securities ormake any change to itscapital structure which wouldchange thenumber ofsharesofCommon Stock intowhich theNotes shall beconvertible at thethen current Conversion Price, theCompany shall at thesametimemake proper provisionso that thereafterthere shallbe asufficient number ofshares ofCommon Stock authorized and reserved, free frompreemptive rights,forconversion of theoutstandingNotes.
TheCompany (i)acknowledgesthatitwillirrevocablyinstructitstransfer agent toissue certificatesfor theCommon Stock issuableuponconversion ofthisNote, and (ii) agrees that itsissuance ofthisNoteshall constitute full authority to itsofficersand agents whoarecharged with the dutyofexecuting stock certificates toexecuteandissue thenecessary certificates forshares ofCommon Stock inaccordance withtheterms and conditions of thisNote.
If, atanytime theCompanydoes notmaintaintheReserved Amount itwillbeconsidered an EventofDefault as definedin thisNote.
(a) MechanicsofConversion.ThisNote may beconvertedbythe
Holder,in wholeorinpart, at any timefollowingexecutionbysubmitting to theCompanyaNoticeofConversion(byfacsimile, e-mail orother reasonablemeans ofcommunication dispatched on theConversionDateprior to 6:00p.m.,New York, NewYorktime).
(b) SurrenderofNote Upon Conversion. Notwithstanding anything to the contraryset forthherein,uponconversion ofthisNoteinaccordance with thetermshereof, theHolder shall not berequiredtophysically surrender thisNote tothe Company unless the entireunpaid principal amount ofthisNote issoconverted. TheHolder and theCompanyshall maintain recordsshowingtheprincipal amountsoconverted andthedates ofsuch conversions orshall use such other method, reasonablysatisfactoryto theHolder and the Company,soas not to requirephysical surrender of thisNote uponeachsuchconversion.In theeventofanydisputeordiscrepancy, such records of the Holdershall,primafacie, becontrolling and determinative in theabsence ofmanifesterror. TheHolder and any assignee, byacceptance of thisNote, acknowledge andagreethat, byreasonof theprovisions of thisparagraph,followingconversion of aportion of thisNote, theunpaidandunconverted principal amount of thisNoterepresented by thisNote may beless than theamount statedon theface hereof.
(c) PaymentofTaxes.TheCompanyshall not berequiredtopay anytax which may be payable inrespect ofanytransfer involved in theissueand delivery ofshares ofCommon StockorothersecuritiesorpropertyonconversionofthisNote in aname other thanthatof theHolder(or instreet name), and theCompanyshall not be required toissue ordeliver any such shares orother securitiesor propertyunless and until theperson orpersons(other than theHolder or thecustodian inwhosestreetname such shares are to beheld for theHolder’saccount) requesting theissuance thereof shallhavepaid to theCompanytheamount ofany such tax orshall have establishedto thesatisfaction ofthe Companythat such tax has been paid.
(d) Delivery ofCommon Stock Upon Conversion. Upon receiptbytheCompany from theHolder of afacsimiletransmissionore-mail(orother reasonable means ofcommunication)of aNoticeofConversion meeting therequirementsforconversion as provided in thisSection,theCompanyshallissueand deliver orcauseto beissuedand delivered to or upon theorder of theHoldercertificatesfor theCommon Stock issuable uponsuch conversion within three (3)business days after such receipt (the“Deadline”) (and, solely in the case ofconversion of theentire unpaid principal amounthereof,surrenderofthisNote) inaccordance with the termshereof and thePurchaseAgreement.
WithinFive(5)business days ofhaving received common stock pursuant to aNoticeofConversion and prior tohaving traded any shares from that specific conversion, Holder may electtorescind theNotice ofConversion and returntheshares, at Holder'sexpense, to theCompany's Transfer Agent. In theeventofsuch rescission, theprincipal amount outstanding under thisNote shall beadjustedtoinclude theConversion Amountwhich was deducted from theNote as part of therescinded NoticeofConversion.
(e) ObligationofCompany toDeliverCommon Stock. Upon receipt by theCompanyof aNoticeofConversion,theHolder shall be deemed to be theholderof recordoftheCommon Stock issuableuponsuch conversion, theoutstanding principal amount and theamountofaccrued and unpaid intereston thisNote shallbereduced toreflect such conversion,and,unless theCompanydefaults on itsobligationsunderthisArticleI,allrightswith respect to the portion of thisNote beingso convertedshall forthwithterminateexceptthe right toreceivetheCommon Stockorothersecurities, cash orotherassets, as herein provided,onsuch conversion.If theHoldershall have given aNotice ofConversion asprovidedherein, theCompany’sobligation toissueand deliver thecertificates forCommon Stock shall be
absolute and unconditional, irrespectiveof theabsenceofanyactionbytheHolder toenforce thesame,anywaiver orconsent with respect toanyprovision thereof,the recovery ofanyjudgment againstanyperson orany action toenforce thesame,anyfailure or delay in theenforcement ofany other obligationof theCompany to theholder of record, oranysetoff, counterclaim, recoupment, limitation ortermination, orany breach oralleged breach by theHolderofanyobligation to theCompany,and irrespective ofany other circumstance which mightotherwise limitsuch obligationof theCompany to theHolderinconnection with suchconversion.TheConversion Date specified in theNoticeofConversion shall be theConversion Dateso longas theNoticeofConversion isreceivedbytheCompany before 6:00p.m.,New York, New Yorktime, onsuchdate.
(f) Delivery ofCommon Stock by ElectronicTransfer.Inlieu ofdelivering physical certificates representing theCommon Stock issuable uponconversion,provided theCompany isparticipatingin the Depository TrustCompany (“DTC”)FastAutomated Securities Transfer (“FAST”)program,uponrequest of theHolder and itscompliance with theprovisions containedinSection 1.1and in this Section1.4, the Companyshall use itsbestefforts tocause itstransfer agent toelectronically transmit theCommon Stockissuable uponconversion to theHolder bycrediting theaccountofHolder’sBrokerwithDTC through itsDeposit Withdrawal Agent Commission (“DWAC”) system.
(g) Failure toDeliverCommon Stock Prior toDeadline. Withoutinany waylimiting theHolder’sright topursueotherremedies,including actual damages and/or equitable relief, theparties agree that ifdelivery of theCommon Stock issuable uponconversion of thisNoteis notdelivered by theDeadlinethe Companyshall pay to theHolder$2,000perday incash,foreachdaybeyondtheDeadline that theCompany fails todeliver such Common Stock. Suchcashamount shall bepaid toHolderby thefifthday of the month following the month inwhichithas accruedor,at the option of theHolder(bywritten notice to theCompany by thefirstday of the monthfollowingthe month inwhich ithas accrued), shall beadded to theprincipal amountof thisNote, inwhicheventinterest shall accrue thereon inaccordance with the terms of thisNote and such additional principal amount shall beconvertible intoCommon Stock inaccordance with the terms of thisNote.The Companyagrees thatthe right toconvertis avaluableright to theHolder. Thedamagesresultingfrom afailure, attempt tofrustrate, interference with such conversion rightaredifficultif notimpossible toqualify.Accordingly theparties acknowledge that theliquidated damages provision contained in thisSectionarejustified.Anydelayor failure ofperformance by theCompany hereunder shallbeexcused ifandto theextentcausedby ForceMajeure.Forpurposes of thisagreement, ForceMajeure shall meanacause orevent that is notreasonably foreseeable andnotcaused by theCompany, including acts ofGod,fires,floods,explosions, riotswars, hurricanes, etc.
1.5 Concerning theShares.Theshares ofCommon Stock issuableuponconversionofthisNote may not besold ortransferred unless(i)such shares aresold pursuant toan effective registration statementundertheAct or (ii) theCompany oritstransfer agent shall have been furnished with an opinion ofcounsel (which opinionshallbe inform, substance and scope customaryforopinions ofcounsel incomparable transactions)to theeffect that theshares to besold ortransferredmaybesold ortransferred pursuant toan exemption from such registration or (iii)such sharesaresold ortransferred pursuant toRule 144under theAct(or asuccessorrule)(“Rule 144”) or (iv)such shares aretransferred toan “affiliate”(asdefined inRule 144) of the Companywho agrees tosell orotherwise transfer thesharesonly inaccordance with thisSection 1.5 and who isan AccreditedInvestor.Except as otherwiseprovidedherein (andsubject to theremoval provisionssetforth below), untilsuchtimeas thesharesofCommon
Stock issuableuponconversionof thisNote have been registered under theActorotherwisemay besold pursuant toRule144without any restriction as to thenumberofsecurities as of aparticular date that can then beimmediately sold, each certificate forsharesofCommon Stock issuable uponconversionof thisNote that has notbeensoincludedinan effective registration statement orthat has notbeen sold pursuant toan effective registration statementoran exemption that permitsremovalof thelegend,shallbearalegend substantially in the followingform, as appropriate:
“NEITHERTHEISSUANCE ANDSALE OF THESECURITIESREPRESENTED BYTHISCERTIFICATENORTHESECURITIES INTOWHICHTHESESECURITIES AREEXERCISABLE HAVEBEENREGISTEREDUNDER THESECURITIES ACT OF1933, ASAMENDED, ORAPPLICABLESTATE SECURITIESLAWS. THESECURITIES MAY NOT BEOFFERED FORSALE,SOLD,TRANSFERRED ORASSIGNED (I) IN THEABSENCEOF(A)ANEFFECTIVE REGISTRATION STATEMENT FORTHESECURITIES UNDER THESECURITIES ACT OF1933, ASAMENDED, OR(B) AN OPINION OFCOUNSEL (WHICH COUNSELSHALL BESELECTEDBY THEHOLDER),IN AGENERALLY ACCEPTABLE FORM,THATREGISTRATION ISNOTREQUIREDUNDER SAIDACT OR(II)UNLESSSOLDPURSUANT TORULE144 ORRULE 144AUNDERSAIDACT. NOTWITHSTANDING THEFOREGOING, THESECURITIES MAY BEPLEDGED INCONNECTIONWITH A BONAFIDE MARGIN ACCOUNT OROTHER LOAN ORFINANCING ARRANGEMENT SECUREDBYTHE SECURITIES.”
Thelegendsetforth above shall beremoved and theCompanyshallissue to theHolderanewcertificatethereforefree ofanytransfer legend if (i) theCompany or itstransfer agent shall have received an opinion of counsel, inform, substance and scope customary for opinions ofcounselincomparable transactions,to theeffect that apublic sale ortransfer ofsuchCommon Stock may bemade without registration under theAct,which opinionshall beacceptedby the Companyso that thesale ortransfer iseffected or (ii) in the case of theCommon Stock issuable uponconversionof thisNote,such security isregistered forsale by theHolder under an effective registrationstatement filedundertheAct orotherwisemaybesold pursuant toRule 144withoutanyrestriction as to thenumber ofsecurities as of aparticular date that can then be immediatelysold.IntheeventthattheCompany does notaccept the opinion ofcounsel provided by theBuyer with respect to thetransfer ofSecurities pursuant toan exemption from registration, such as Rule 144 or RegulationS,at theDeadline,itwill beconsidered an Event ofDefault pursuant to thisnote.
| 1.6 | EffectofCertain Events. |
(a) EffectofMerger, Consolidation, Etc. At theoptionof theHolder, thesale, conveyanceordisposition ofall orsubstantiallyall of the assets of the Company, theeffectuationby the Company of a transaction or series ofrelated transactions inwhich more than 50% of the votingpower of the Company isdisposedof, or theconsolidation, merger orother business combination of the Companywith or intoany other Person (asdefined below) orPersons when the Company is not thesurvivor shalleither:(i) bedeemed to bean Event ofDefault (asdefined inArticleIII)pursuant to which the Companyshallberequired topayto theHolderupon the consummation ofand as a condition tosuch transaction an amount equal to theDefault Amount (asdefinedinArticle III) or(ii) betreated pursuant toSection 1.6(b)hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trustor otherentityororganization.
(b) Adjustment DuetoMerger,Consolidation, Etc.If,atanytimewhen thisNote isissuedand outstanding andprior toconversionofall of theNotes, there shall beanymerger, consolidation, exchange ofshares,recapitalization, reorganization,orothersimilarevent,as aresult ofwhich shares ofCommonStockoftheCompanyshall bechangedinto thesame or adifferent numberofshares ofanother class orclasses ofstockorsecurities of theCompany oranother entity, or incase ofany sale orconveyance ofallorsubstantiallyall of theassetsof theCompanyother than inconnection with aplan of completeliquidationof theCompany,thentheHolder of thisNote shall thereafter have the right toreceive uponconversionof thisNote, upon thebasis and upon theterms and conditions specified herein and inlieuof theshares ofCommon Stock immediatelytheretofore issuable uponconversion, such stock, securities orassetswhichtheHolder would have been entitled toreceiveinsuch transaction had thisNote been converted in fullimmediately prior tosuch transaction (withoutregard toanylimitations onconversionsetforthherein),andinany such caseappropriate provisions shall bemade with respect to the rightsand interests of theHolder of thisNoteto theend that theprovisions hereof (including, without limitation, provisions foradjustment of theConversionPriceand of thenumberofshares issuable uponconversion of theNote) shall thereafter beapplicable, as nearly as may bepracticable inrelationtoanysecurities orassetsthereafter deliverable upon theconversion hereof. TheCompanyshall notaffect any transaction described in thisSection 1.6(b)unless(a) itfirstgives, to theextentpracticable, thirty (30)days prior written notice (but inany event at least fifteen (15) days prior written notice)of the recorddate of thespecial meetingofshareholders toapprove, orif there is nosuch recorddate,theconsummationof,such merger, consolidation, exchange ofshares, recapitalization, reorganizationorother similareventorsale ofassets (duringwhichtime theHolder shall beentitled toconvert thisNote) and (b) theresulting successor oracquiring entity(if not theCompany) assumes bywritten instrumenttheobligations of thisSection1.6(b). Theabove provisions shall similarlyapply tosuccessiveconsolidations, mergers,sales,transfers orshareexchanges.
(c) Adjustment DuetoDistribution.If theCompanyshall declareormake any distributionof its assets (orrightstoacquireits assets) toholdersofCommon Stock asadividend, stock repurchase,byway ofreturnofcapitalorotherwise(includinganydividendordistributionto the Company’sshareholdersin cashorshares(orrightstoacquire shares)ofcapital stockof asubsidiary (i.e.,aspin-off))(a“Distribution”),then theHolderof thisNote shallbe entitled, uponany conversionofthisNoteafter thedateofrecordfordetermining shareholders entitledto suchDistribution,to receive theamountofsuch assets which would have been payableto theHolder with respectto thesharesofCommonStockissuableuponsuch conversion had suchHolderbeentheholderofsuch sharesofCommon Stockon the recorddatefor thedeterminationofshareholders entitledtosuch Distribution.
(d) Adjustment Due toDilutiveIssuance.If, at anytimewhen any Notesissuedunder theSecurities Purchase Agreementofeven date herewith areissuedand outstanding, theCompanyissuesorsells, or inaccordance with thisSection 1.6(d) hereof isdeemedtohaveissued orsold, any shares ofCommon Stock inconnection withafinancing transaction based on avariableprice formula (the“Alternative Variable Price Formula”) that is more favorable to theinvestor insuch financing transaction thantheformulaforcalculating theConversion Price ineffect on thedateofsuch issuance (ordeemed issuance) ofsuch shares ofCommon Stock (a“Dilutive Issuance”), then immediately upon theDilutive Issuance, theformulafor theConversion Price will beadjustedtomatch theAlternative Variable PriceFormula. Ifit isunclear whether theAlternative Variable
PriceFormula isbetter orworse, then Holder, initssole discretion, may elect at thetimeofsuch issuance whether toswitch to theAlternative Variable PriceFormulaornot.
(e) PurchaseRights.If, atany timewhenany Notes areissuedand outstanding, theCompany issuesany convertible securities orrights topurchase stock, warrants, securities orother property (the “PurchaseRights”)pro rata to therecord holdersofany class ofCommon Stock, then theHolder of thisNote will beentitledtoacquire, upon the termsapplicabletosuch Purchase Rights, theaggregate Purchase Rightswhichsuch Holder could have acquiredifsuch Holder had heldthenumberofsharesofCommonStock acquirable uponcomplete conversion of thisNote (withoutregard toany limitationsonconversion contained herein) immediately before thedateonwhich a record istaken for the grant,issuance orsale ofsuchPurchaseRights or,ifnosuch record istaken, thedate as ofwhich the recordholders ofCommon Stockare to bedeterminedfor thegrant,issueorsaleofsuch Purchase Rights.
(f) Notice ofAdjustments. Upon theoccurrence ofeach adjustmentorreadjustmentof the Conversion Priceasaresult of theeventsdescribedin thisSection 1.6, theCompany,at itsexpense, shall promptly computesuch adjustment orreadjustment and prepare and furnish to theHolder of acertificate setting forth such adjustment orreadjustment and showingindetailthefacts uponwhich such adjustment orreadjustment isbased. TheCompanyshall, upon thewritten request at anytimeof theHolder, furnish tosuch Holder a likecertificate setting forth (i)such adjustmentorreadjustment, (ii) theConversion Price at the time ineffect and (iii) thenumber ofshares ofCommon Stock and theamount, ifany,ofothersecurities or propertywhich at the timewould bereceiveduponconversionof theNote.
1.7 Security As Securityfor the Company'sobligations contained herein and in allNotes issued by theCompanytotheHolder, followinganyEvent ofDefault which remains uncuredforthirty (30) calendar days,theHolder shall begranted anunconditional first priority interest in andto, any and allpropertyof theCompanyand itssubsidiaries,of any kind ordescription, tangible orintangible, whether nowexisting orhereafter arisingoracquired untilthebalanceofallNoteshasbeen reduced to$0. "Any and allproperty," asdescribed herein shall beinclusiveof, but notlimited to,assets reported by theCompanyon itsSEC filings, cash, inventory, accounts receivable, intellectual property rights, equipment and orproperty. The Investor isauthorizedto make all filings theInvestor, in itsdiscretion, deemsnecessarytoevidence itssecurityinterests.
1.8 Status as Shareholder. Upon submissionofaNotice ofConversionbyaHolder,(i) theshares covered thereby (otherthan theshares,ifany,which cannot beissuedbecause their issuance would exceed such Holder’sallocated portion of theReserved Amount orMaximum ShareAmount) shallbedeemed convertedintosharesofCommon Stock and (ii) the Holder’s rightsas aHolderofsuch converted portion of thisNote shallceaseandterminate,excepting only the right toreceive certificatesforsuch shares ofCommon Stock and to anyremedies providedherein orotherwise availableatlaw or in equity tosuch Holder becauseof a failureby theCompanytocomply with theterms of thisNote.Notwithstanding theforegoing,if aHolder has not receivedcertificatesforall shares ofCommon Stock priorto thetenth (10th) business dayaftertheexpirationof theDeadline with respect to aconversion of anyportionof thisNotefor anyreason, then (unless theHolder otherwise elects toretainitsstatus as aholderofCommon Stock bysonotifyingtheCompany) theHolder shall regainthe rightsof aHolder of thisNote with respect tosuch unconvertedportions of thisNote and theCompanyshall, as soon as practicable, returnsuch unconverted Noteto theHolder or, if theNote has notbeen surrendered, adjustits records toreflect that such portion ofthisNote has notbeen converted.Inall cases, theHolder shall retain all of itsrightsandremedies (including, without limitation, (i)
the right toreceive Conversion Default Payments pursuant toSection 1.3 to theextentrequired therebyforsuch ConversionDefault andanysubsequent Conversion Default and(ii) theright tohave theConversionPricewith respect tosubsequentconversions determined inaccordance with Section 1.3) for theCompany’sfailure toconvertthisNote.
1.9 Prepayment. Maker may prepay thisNote,inaccordance with the followingschedule:Ifwithin 60calendar days fromtheexecutionof thisNote, 120% ofall outstanding principal andinterestdue oneach outstanding Note in onepayment;After 60calendar days from theexecutionof the noteand within120days fromexecution, 130% ofall outstanding principal andinterest due oneach outstanding Note in onepayment. Between 121and180days from thedate ofexecution,theNote may beprepaidfor135% ofall outstanding amounts due oneach outstanding Note in onepayment.
ARTICLEII. CERTAIN COVENANTS
2.1 Distributions onCapital Stock.So longas theCompanyshall haveanyobligationunderthisNote, theCompanyshallnotwithout theHolder’s written consent (a)pay, declare orsetapart forsuchpayment,anydividend orother distribution (whether incash, property orothersecurities) onshares ofcapital stock other than dividends onshares ofCommon Stock solely in theform ofadditional shares ofCommon Stock or(b) directly orindirectly or throughanysubsidiary makeanyother payment ordistribution inrespect of itscapital stockexceptfordistributions pursuanttoanyshareholders’ rightsplan which isapproved by a majority of theCompany’sdisinteresteddirectors.
2.2 RestrictiononStock Repurchases.So longas theCompanyshall haveanyobligation under thisNote,theCompanyshall notwithoutthe Holder’swritten consentredeem,repurchase orotherwise acquire (whetherfor cash or inexchange forpropertyorother securities orotherwise) inany onetransaction orseriesofrelated transactionsanysharesofcapitalstockof theCompanyoranywarrants, rights or options topurchaseoracquireanysuchshares.
2.3 Borrowings. SolongastheIssuershall have any obligationunder thisNote, theIssuershallnot,withoutprovidingtheHolderwithwritten notice,create,incur,assumeguarantee, endorse, contingentlyagree topurchase orotherwise become liable upon theobligation of anyperson, firm,partnership, joint venture orcorporation,except by theendorsement ofnegotiableinstruments fordeposit orcollection,orsuffer toexist
anyliability forborrowedmoney, except (a)borrowings inexistence orcommitted on thedate hereof andofwhich theIssuerhas informedHolder in writing prior to thedate hereof, (b)indebtednessto tradecreditors orfinancial institutions incurred in theordinary course ofbusinessor (c)borrowings, theproceeds ofwhichshall beusedto repay thisNote.
2.4 Sale ofAssets.So longas theCompanyshall haveanyobligation under thisNote,theCompanyshall not,withouttheHolder’s written consent,sell, lease orotherwise dispose ofanysignificant portion of itsassetsoutsidethe ordinarycourse ofbusiness.Anyconsent to thedisposition ofanyassetsmaybe conditioned on aspecified use of theproceedsofdisposition.
| 2.5 | Advances andLoans.So longastheCompanyshall haveanyobligation |
underthisNote,theCompanyshallnot,withouttheHolder’s written consent, lend money, givecreditormake advances toany person, firm, jointventure orcorporation, including, without limitation,officers, directors, employees,subsidiaries andaffiliatesof theCompany,exceptloans, credits oradvances(a) inexistenceorcommitted on thedate hereof and which theCompanyhas informed Holderin writingpriorto thedate hereof, (b)madein theordinary courseofbusinessor (c) not inexcessof$50,000.
ARTICLE III.EVENTS OF DEFAULT
Ifanyof the followingeventsofdefault (each, an “Event ofDefault”)shalloccur:
3.1 Failure toPayPrincipal orInterest.TheCompanyfails topay theprincipal hereof orinterestthereon when due on thisNote,whether atmaturity,uponaccelerationorotherwise.
3.2 Conversion and theShares.TheCompany fails toissuesharesofCommon Stock to theHolder (orannounces orthreatens in writingthatitwillnothonoritsobligationto doso) uponexercise by theHolder of theconversion rightsoftheHolder inaccordance with the terms of thisNote, fails totransferorcause itstransfer agent totransfer (issue) (electronicallyor incertificated form) anycertificateforsharesofCommon Stockissued to theHolderuponconversion of orotherwise pursuantto thisNote as and when required by thisNote,theCompanydirectsitstransfer agent nottotransferordelays, impairs, and/or hinders itstransfer agent intransferring (orissuing) (electronicallyor incertificated form) anycertificate forshares ofCommon Stockto beissued to theHolderuponconversionof orotherwise pursuantto thisNote as and when required by thisNote,or fails to remove (ordirectsitstransfer agent not to remove orimpairs, delays, and/or hinders itstransfer agent from removing) anyrestrictive legend(or towithdraw any stop transfer instructions inrespect thereof) on anycertificatefor anyshares ofCommon Stockissuedto theHolder uponconversionoforotherwise pursuant to thisNote as and whenrequired bythisNote (ormakes any written announcement, statementorthreat that itdoes notintendto honor theobligations described in thisparagraph) and anysuch failure shall continue uncured (or anywritten announcement, statement orthreat not tohonoritsobligations shall not berescindedinwriting) for three(3)businessdaysafter theHoldershall have delivered aNotice ofConversion.It isan obligationof theCompany toremain current in itsobligations to itstransfer agent.Itshall beanevent ofdefaultofthisNote,if aconversionof thisNote isdelayed, hindered orfrustrated due to abalance owed by theCompany to itstransfer agent.Ifat the option of theHolder,theHolderadvances any funds to theCompany’stransfer agent inorder toprocess aconversion, such advanced fundsshall bepaidby theCompany to theHolder within fortyeight(48)hours of ademand fromtheHolder.
3.3 Breach ofCovenants.TheCompanybreachesanycovenant orother term orcondition contained in thisNote andanycollateral documents includingbut notlimitedto thePurchaseAgreement.
3.4 Breach ofRepresentations and Warranties. Any representation or warranty of theCompanymade hereinor inany agreement, statementorcertificategivenin
writingpursuant hereto or inconnection herewith(including, without limitation, thePurchaseAgreement), shall befalse ormisleading inanymaterial respect when made and thebreach ofwhich has (orwith thepassage of timewill have) amaterial adverse effect on the rights of theHolder with respectto thisNoteor thePurchaseAgreement.
3.5 Receiver orTrustee.TheCompany oranysubsidiaryof theCompanyshall make an assignmentfor thebenefitofcreditors,or apply for or consent to theappointment of areceiveror trustee for itor for asubstantialpart of its property or business, orsuch areceiveror trusteeshall otherwise beappointed.
3.6 Judgments.Any moneyjudgment,writ orsimilar process shall beentered or filedagainst theCompanyoranysubsidiaryoftheCompany orany of its property orotherassets formore than $50,000,and shall remain unvacated, unbondedorunstayed for a period of twenty (20)days unless otherwise consented to by theHolder, which consentwillnot be unreasonablywithheld.
3.7 Bankruptcy. Bankruptcy, insolvency, reorganization orliquidation proceedings orotherproceedings, voluntary orinvoluntary,forrelief underanybankruptcylaworany law for therelief of debtorsshall beinstituted by oragainsttheCompany oranysubsidiaryof the Company.
3.8 Delisting ofCommon Stock.TheCompanyshall fail tomaintain,in goodstanding, thelisting of theCommon Stock on the OTCBulletin Board oran equivalent replacement exchange, theNasdaq National Market, theNasdaq SmallCap Marketor theNewYorkStock Exchange.
3.9 Failure to Complywith theExchange Act.TheCompanyshallfail totimely complywith the reportingrequirementsof theExchange Act; and/or theCompany shallcease to besubjectto the reportingrequirementsof theExchange Act.
3.10 Liquidation. Any dissolution, liquidation, orwindingup ofCompany orany substantial portion of itsbusiness.
3.11 Cessation ofOperations. Any cessation ofoperations byCompanyorCompanyadmits it isotherwisegenerally unable topay itsdebtsas such debts become due, provided,however, that any disclosure of theCompany’sabilitytocontinue as a“going concern” shall not bean admission that the Companycannot pay itsdebts as theybecomedue.
3.12 MaintenanceofAssets.ThefailurebyCompanytomaintain any material intellectual propertyrights, personal, real property orother assetswhichare necessary toconductitsbusiness (whether now or in thefuture).
3.13 Financial Statement Restatement.Therestatementofany financial statements filedby theCompany with the SEC foranydateorperiod from twoyearsprior to theIssueDate of thisNote and until thisNote is nolonger outstanding, if theresultofsuch restatement would, bycomparison to theoriginalfinancial statement, have constitutedamaterial adverse effect on the rights of theHolderwith respect tothisNoteorsupporting documents.
3.14 ReverseSplits.TheCompanyeffectuates areverse splitof itsCommon Stock without at least twenty (20)days priorwritten notice to theHolder.
3.15 Replacement ofTransfer Agent.In theevent that theCompanyproposes toreplace itstransfer agent, theCompany fails to provide,priorto theeffective dateofsuch replacement, a fullyexecutedIrrevocable Transfer Agent Instructions in aform as initially
delivered pursuantto thePurchaseAgreement (including but notlimitedto theprovisionto irrevocablyreserve shares ofCommon Stock intheReserved Amount) signed by thesuccessortransfer agent toCompanyandthe Company.
3.16 Cross-Default. Notwithstanding anything to the contrarycontainedin thisNote or theother related orcompanion documents, abreach ordefaultby theCompanyof anycovenant orother term orcondition contained inany of theOther Agreements,after thepassageofall applicable notice and cure orgraceperiods,shall, at the option of the Holder, beconsidered adefault under thisNote and theOther Agreements, inwhichevent theHolder shall beentitled (but in noevent required)to applyall rights and remedies of theHolder under the terms of thisNote and theOther Agreementsbyreason of adefault under said Other Agreement orhereunder. “Other Agreements” means,collectively,allagreementsand instruments between, among orby:(1) theCompany, and, or for thebenefitof, (2) theHolder and anyaffiliateof theHolder, including, without limitation, promissory notes; provided, however,the term“Other Agreements” shall notincludetherelated orcompanion documents to thisNote. Each of theloan transactionswillbecross-defaultedwith each other loan transaction and with all otherexistingandfuturedebt of Company.
Upontheoccurrence and during thecontinuationofanyEvent ofDefault specified inSection3.1(solely with respecttofailuretopaytheprincipal hereof orinterest thereon whendueattheMaturity Date), theNote shall becomeimmediately dueand payable and the Companyshallpay to theHolder, in fullsatisfactionof itsobligations hereunder, an amount equal to theDefaultSum (asdefinedherein).UPONTHEOCCURRENCEAND DURING THECONTINUATION OF ANY EVENTOFDEFAULTSPECIFIEDINSECTION 3.2, THE NOTESHALL BECOMEIMMEDIATELYDUEANDPAYABLEAND THECOMPANYSHALL PAYTO THEHOLDER, INFULL SATISFACTION OF ITSOBLIGATIONSHEREUNDER, ANAMOUNTEQUALTO:(Y) THEDEFAULTSUM(ASDEFINED
HEREIN); MULTIPLIED BY(Z)TWO (2).Upontheoccurrence and duringthecontinuationofany Event ofDefault specified inSections 3.1 (solelywith respect to failure topay theprincipal hereoforinterestthereon when due on thisNote upon a TradingMarketPrepayment Eventpursuant toSection 1.7 or uponacceleration), 3.3,3.4,3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or
3. 15exercisable through thedeliveryofwritten notice to theCompanybysuch Holders (the“Default Notice”), and upon theoccurrence ofanEvent ofDefault specified theremaining sections ofArticles III (other than failure to pay theprincipal hereoforinterestthereon at the MaturityDatespecified inSection 3,1hereof), theNote shall become immediately dueand payable and theCompanyshall pay to theHolder, in fullsatisfactionof itsobligations hereunder, an amount equal to150%times thesum of (w)thethen outstanding principal amountof thisNoteplus(x)accrued and unpaidinterest on theunpaid principal amount of thisNote to thedate of payment (the “MandatoryPrepaymentDate”)plus(y)DefaultInterest,ifany, on theamounts referred to inclauses(w)and/or(x)plus (z)any amounts owed to theHolderpursuant toSections1.3and 1.4(g) hereof (thethenoutstanding principal amountof thisNote to thedate ofpaymentplus theamounts referred toinclauses (x), (y)and (z)shall collectively beknown as the“DefaultSum”) .
IftheCompanyfails topaytheDefault Amount withinfive (5)businessdays ofwritten notice that such amountis dueandpayable,thentheHolder shall have the rightat anytime, so longastheCompanyremains indefault(andso longand to theextentthat therearesufficient authorized shares),to require theCompany, uponwritten notice, to immediatelyissue, inlieuof theDefault Amount, thenumber ofshares ofCommon Stock of theCompanyequal to theDefault Amount dividedby theConversion Pricethen ineffect.
ARTICLE IV. MISCELLANEOUS
4.1 Failure orIndulgence Not Waiver. No failure or delay on thepartof theHolder in theexercise of anypower,right orprivilegehereunder shalloperate as awaiver thereof, norshall any singleorpartialexerciseof anysuch power, rightorprivilege preclude otherorfurther exercise thereofor of anyotherright, power orprivileges. All rights and remediesexistinghereunder arecumulativeto, and notexclusive of,any rights orremedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required orpermitted hereunder shall be inwriting and, unless otherwise specified herein, shall be (i) personallyserved, (ii) depositedin the mail,registered or certified, returnreceiptrequested,postage prepaid, (iii)deliveredbyreputable air courier service with charges prepaid, or (iv)transmitted byhand delivery, telegram, orfacsimile, addressedasset forthbelow or tosuch other address as such partyshall have specified most recentlybywritten notice. Anynotice orother communication required orpermitted to begiven hereunder shall bedeemed effective(a) uponhand delivery ordeliverybyfacsimile, with accurate confirmation generated by thetransmitting facsimile machine, at the address ornumber designated below (ifdeliveredon abusiness dayduring normalbusiness hourswhere such notice is to bereceived), or the firstbusinessday followingsuch delivery (ifdeliveredotherthan on abusiness day during
normalbusiness hourswheresuch notice is tobereceived) or (b) on thesecond businessday following thedate ofmailing byexpresscourier service, fullyprepaid,addressed tosuch address, or uponactual receipt ofsuch mailing, whichever shallfirstoccur. Theaddresses forsuch communications shall be:
Ifto theCompany,to:
_____________________
_____________________
_____________________
Ifto theHolder:
GHSInvestments,LLC.
420Jericho Turnpike
Suite 207
Jericho, NY11753
4.3 Amendments. ThisNote andanyprovision hereofmayonly beamendedbyan instrument inwriting signedby theCompanyandtheHolder. Theterm“Note” and all reference thereto, as used throughout thisinstrument, shall meanthisinstrument (and theother Notesissuedpursuantto thePurchaseAgreement) as originallyexecuted, or iflater amended orsupplemented, then assoamended orsupplemented.
4.4 Assignability. ThisNote shallbe binding upon theCompanyand itssuccessorsand assigns, and shall inure to be thebenefitof theHolder and itssuccessorsandassigns.Notwithstanding anything inthisNotetothecontrary,thisNote may bepledged as collateralinconnectionwith abona fidemargin account orotherlending arrangement.
4.5 Cost ofCollection.Ifdefault ismadein thepayment of thisNote, theCompanyshallpaytheHolder hereof costs ofcollection, including reasonable attorneys’fees.
4.6 GoverningLaw.ThisNote shall begovernedbyand construedinaccordance with thelawsof theStateofNevada without regard toprinciplesofconflicts oflaws. Any actionbroughtbyeither partyagainstthe otherconcerning thetransactions contemplatedby thisNote shall bebrought onlyin thestateorfederal courts located in theCounty, City and StateofNew York. Thepartiesto thisNote hereby irrevocablywaiveanyobjection tojurisdiction and venueof anyaction instituted hereunder and shall notassertanydefense based onlack ofjurisdiction orvenue or based uponforum nonconveniens. TheCompanyand Holder waive trial byjury. Theprevailing partyshall beentitledtorecover from theother party itsreasonable attorney's fees andcosts. Intheevent that any provision of thisNoteorany other agreement delivered inconnection herewith isinvalid orunenforceable under anyapplicable statute or rule oflaw,then such provision shall bedeemedinoperative to theextentthatitmay conflict therewith and shall bedeemed modified toconform with such statute or rule oflaw.Any such provision which may proveinvalidorunenforceable under anylaw shallnotaffect thevalidity orenforceabilityof anyother provision of anyagreement. Each party herebyirrevocably waives personal serviceofprocess andconsents toprocessbeingservedinany suit, action orproceeding inconnectionwith thisAgreementorany other Transaction Documentbymailing acopy thereof viaregisteredorcertified mail orovernight delivery(withevidence ofdelivery) tosuch partyat theaddressineffect fornoticesto itunder thisAgreement and agrees that such service shall constitute goodand sufficient serviceofprocess and notice thereof. Nothing contained herein shall bedeemedtolimitinanyway any right toserve process inany other manner permittedbylaw.
4.7 Certain Amounts. Whenever pursuant to thisNotetheCompany is required topay an amountinexcess of theoutstanding principal amount(or theportionthereofrequired to bepaid at that time) plusaccrued and unpaid interest plusDefault Interest onsuch interest, the Companyand theHolder agree that theactualdamages to theHolder from thereceipt ofcashpayment on thisNote maybedifficulttodetermine and theamount to besopaid by theCompanyrepresents stipulated damages and not a penaltyandisintended tocompensate theHolder in part forloss of the opportunity toconvert thisNote and toearna returnfrom thesale ofsharesofCommon Stock acquired uponconversionof thisNote at a price inexcess of the pricepaidforsuch shares pursuant to thisNote. TheCompanyand theHolder hereby agree that such amount ofstipulated damages is not plainlydisproportionateto thepossible loss to theHolder from thereceipt of acash paymentwithouttheopportunity toconvert thisNote intoshares ofCommon Stock.
4.8 Purchase Agreement. By itsacceptanceof thisNote,eachpartyagreesto be bound by theapplicable terms of theSecuritiesPurchaseAgreement and supporting documents .
4.9 NoticeofCorporate Events.Exceptas otherwise providedbelow,theHolder of thisNote shall have norights as aHolder ofCommon Stock unless andonly to theextentthatitconvertsthisNote intoCommon Stock. TheCompanyshall provide theHolder with priornotification ofany meetingof the Company’sshareholders(and copies ofproxy materials and other information sent toshareholders). In theeventof anytaking by the Company of a record of itsshareholdersforthepurpose ofdetermining shareholders whoareentitled toreceive payment of anydividend orotherdistribution,any right tosubscribe for,purchaseorotherwise acquire (includingbywayofmerger, consolidation, reclassificationorrecapitalization) any share ofany class or anyother securities orproperty,or toreceiveanyotherright,or for thepurposeofdetermining shareholders who areentitledto vote inconnection with anyproposedsale,lease orconveyance ofall orsubstantially all of theassetsof theCompany or anyproposed liquidation,
dissolutionorwindingupoftheCompany, theCompanyshall mail anotice to theHolder, at leasttwenty(20) days prior to the recorddate specified therein (or thirty(30) days prior to theconsummationof thetransactionorevent,whichever isearlier), of thedate onwhich anysuchrecord is to betakenfor thepurposeofsuch dividend, distribution, right orotherevent,and a briefstatementregarding theamount and character ofsuch dividend, distribution, right orother event to theextentknown at suchtime. TheCompanyshall make a publicannouncement of anyevent requiring notification to theHolderhereundersubstantially simultaneouslywith thenotification to theHolderinaccordance withtheterms of thisSection 4.9.
4.10 Remedies.TheCompanyacknowledgesthat abreachbyitof itsobligations hereunder will cause irreparable harm to theHolder, byvitiatingtheintent and purpose of the transactioncontemplated hereby. Accordingly, theCompanyacknowledges that the remedyat lawfor abreachof itsobligationsunder thisNote will beinadequate and agrees, in theeventof abreach orthreatened breachby theCompany of theprovisionsof thisNote, that theHolder shallbeentitled, inaddition toall other available remedies at law or inequity, and inadditionto thepenaltiesassessableherein,toan injunction orinjunctions restraining, preventing orcuring anybreach of thisNote and toenforce specifically the termsand provisions thereof,without thenecessity ofshowing economic loss and without any bondorother securitybeingrequired.
INWITNESSWHEREOF,Companyhas caused thisNoteto be signed initsnamebyitsdulyauthorized officer:
Rich Pharmaceuticals, Inc.
By:/s/ Ben Chang
Print:Ben Chang
Title/Date:CEO/3.15.16
