SECURED LOAN AGREEMENT

 

This Secured Loan Agreement (“Agreement”) made and entered into this March 25,
2014, by and between CANNABIS-RX, INC., a corporation duly organized and
existing under and by virtue of the laws of the State of Nevada (hereinafter
referred to as the “Borrower”) and FALCON INVESTMENTS HOLDINGS S.A., a
corporation duly organized and existing under and by virtue of the laws of
Belize (hereinafter referred to as “Lender”).

 

WITNESSETH:

 

WHEREAS, the Borrower has requested a two (2)-year term loan of up to FOURTEEN
MILLION US DOLLARS (US$14,000,000.00) from the Lender, to finance its business
operations and for other general corporate uses;

 

WHEREAS, the Lender has agreed to extend a term loan to the Borrower subject to
the terms and conditions set forth herein;

 

NOW, THEREFORE, for and in consideration of the foregoing premises and of the
mutual covenants and agreements hereinafter stated, the Parties hereto agree as
follows:

 

Section 1. Construction and Definitions

 

1.01 Principles of Construction

 

(a) Capitalized terms used in this Agreement but not otherwise defined shall
have the meanings set forth in Section 1.02 of this Agreement.

 

(b) The headings in this Agreement are inserted for convenience of reference
only and shall not limit or affect the construction of the provisions hereof.
Unless the context otherwise requires, words denoting the singular number shall
include the plural and vice versa, and references to any gender shall include
the other genders. Unless otherwise provided herein, all terms of accounting
used herein shall be construed in accordance with generally accepted accounting
principles in effect in the United States on the date applied. References to
“Sections” and “Exhibits” are to be construed as references to the Sections and
Exhibits of and to this Agreement. The Exhibits attached to this Agreement shall
form integral parts hereof.

 

(c) Reference to any Applicable Law shall be construed as a reference to such
Applicable Law as re-enacted, amended or extended from time to time, and any
reference to any document or agreement, including this Agreement, shall be
deemed to include (i) the schedules and exhibits thereof and thereto which are
attached and made integral parts thereof, and (ii) references to such document
or agreement as may be amended or modified from time to time in accordance with
its terms, but only to the extent such amendments and other modifications are
not prohibited by the terms thereof or of this Agreement, unless otherwise
indicated.

 

(d) Reference to any party to this Agreement or any party to any other agreement
shall include its successors, and in the case of governmental persons, persons
succeeding to their respective functions and capacities.

 

1.02 Definitions

 

When used in this Agreement, the following terms, unless the context otherwise
requires, shall have the following meanings:

 

(a) “Agreement” shall mean this Secured Loan Agreement, the Note/s, and all
annexes, schedules and all future amendments or supplements thereto;

 

(b) “Applicable Law” shall mean any statute, law, regulation, ordinance, rule,
judgment, order, decree, governmental approval, concession, grant, franchise,
license, directive, guideline, policy, requirement or other governmental
restriction or any similar form of decision of, or determination by, or any
interpretation or administration of any of the foregoing by, any governmental
authority;

 

(c) “Banking Day” shall mean a day on which commercial banks are open for
business in New York City. Provided, that all other days not otherwise specified
herein shall mean calendar days which shall be construed as successive periods
of twenty-four (24) hours each whether such periods are Banking Days or not;

 

 

 

(d) “Base Rate” shall mean five (5) percent;

 

(e) “Borrowing” shall mean the advance by the Lender to the Borrower, or as the
context may require, the amount of such advance from time to time outstanding;

 

(f) “Commitment” shall mean the obligation of the Lender to grant a term loan
facility in favor of the Borrower up to the maximum aggregate principal amount
of FOURTEEN MILLION US DOLLARS (US$14,000,000.00) subject to the terms and
conditions of this Agreement;

 

(g) “Days” shall mean consecutive calendar days;

 

(h) “Dollars” or “US Dollars” and the signs “$”, “US$” or “USD” shall mean the
legal currency of the United States of America;

 

(i) “Drawdown” shall mean the act of availing of the Borrowing to be made by the
Lender in favor of the Borrower, here to be made in accordance with Sections
2.02 and 7 hereof;

 

(j) “Event/s of Default” shall have the same meaning set forth in Section 8.01
hereof;

 

(k) “Governmental Authority” shall mean any governmental, state or other
political subdivision thereof, or any entity exercising or entitled to exercise
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government;

 

(l) “Indebtedness” shall mean all obligations of the Borrower then outstanding
for the payment or repayment of money, including (i) all indebtedness of the
Borrower for or in connection with borrowed money or for the deferred purchase
price of property or services or for leases and similar arrangements (including,
but not limited to, reimbursement obligations under or in respect of any letter
of credit or bank acceptance and the obligation to repay deposits with or
advances to the Borrower), and (ii) all direct and indirect guarantees of the
Borrower in respect of, and all obligations (contingent or otherwise) of the
Borrower to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, all indebtedness of another Person; provided,
however, that the term Indebtedness shall not include (a) payment obligations in
the ordinary course of business or in the day-to-day operations of the Borrower,
or (b) agreements providing for indemnification, purchase price adjustments or
similar obligations incurred or assumed in connection with the acquisition or
disposition of assets.

 

(m) “Interest” on the Loan shall be as set out in Section 2.04 hereof.

 

(n) “Lien” shall mean any pledge, mortgage, charge, encumbrance, title retention
or other security arrangement on or with respect to any asset or revenue of the
Borrower;

 

(o) “Loan” shall mean the aggregate principal amount of the Borrowing made by
Borrower hereunder;

 

(p) “Loan Documents” shall mean collectively this Agreement, the Note/s, and all
other agreements, instruments and documents executed or delivered pursuant to
the terms of this Agreement, including any and all amendments or supplements
thereto;

 

(q) “Loan Repayment Date” shall mean the day on which the principal and all
accrued interest is due on the Loan as set out in Section 2.07 hereof.

 

(r) “Note/s” shall mean each of the promissory notes executed on the date of
Drawdown which by their respective terms are incorporated into and form an
integral part of this Agreement, evidencing the Loan pursuant to Section 2.03
hereof and more specifically described in Exhibit “A” hereof or any promissory
note/s delivered by the Borrower with the consent of the Lender in extension,
renewal or substitution thereof and evidencing all or part of the Lender’s
advances;

 

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Section 2. The Loan

 

2.01 Commitment of the Lender

 

The Lender grants to the Borrower a two (2)-year term loan facility in the
maximum aggregate principal amount of FOURTEEN MILLION US DOLLARS
(US$14,000,000.00) upon the terms and subject to the conditions hereof
(“Commitment”). The Lender agrees, upon the terms and subject to the conditions
hereinafter set forth, to make advances in Dollars to the Borrower within three
(3) Banking days from the signing of this Agreement and, from then, from time to
time, as the Borrower makes a demand on the Lender, in an aggregate principal
amount up to but not in excess of their above-stated Commitment

 

2.02 Procedure for Drawdown

 

On any Drawdown date, provided all conditions set forth in Section 6 hereof have
been fulfilled, the Lender shall make available to the Borrower the amount of
Commitment demanded, which amount shall be released by crediting the Borrower’s
designated deposit account/s (electronic fund transfer). The Lender shall,
immediately upon crediting the Borrower’s account/s, notify the Borrower by
facsimile transmission of such fact.

 

2.03 The Notes

 

(a) The Borrowing shall be evidenced by Note/s, substantially in the form of
Exhibit “A” hereof, dated on the Drawdown date.

 

(b) On or before any Drawdown date, the Borrower shall deliver to the Lender the
duly executed Note/s evidencing the Borrowing on such date in accordance with
the Agreement.

 

The provisions of the Note/s, once executed, shall be complemented by the terms
and conditions of this Agreement; provided, however, that in case of conflict
between the Notes and this Agreement, the latter shall prevail.

 

2.04 Interest

 

(a) The Borrower shall pay Interest on the Loan equal to the Base Rate (the
“Interest Rate”).

 

(b) All payments for Interest pursuant to this Section shall be computed on the
basis of a 360-day year for the actual days elapsed.

 

(c) All accrued but unpaid interest shall be due and payable on the Loan
Repayment Date.

 

2.05 Security

 

(a) As security for the payment of the Borrowing, the Borrower obliges itself to
mortgage in favor of the Lender such real property as will be agreed upon by the
Lender and the Borrower (the “Collateral”) to ensure the outstanding amount of
the Borrowing.

 

It is understood and agreed that all additions and accretions to, or
replacements or substitutions of, said Collateral shall be made and subject to
the lien of this mortgage and shall be held for the security and payment of the
outstanding amount of the Borrowing including interest, expenses or any such
other obligations owing to the Lender under this Agreement.

 

(b) The Borrower states that it is the sole and beneficial owner of the
Collateral and the one in possession thereof free from any lien, encumbrance or
other security interest of any other person, except as otherwise disclosed in
writing, or as provided under Section 6.02(d) hereof.

 

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(c) During the term and existence of this Agreement, the Borrower shall insure
or cause to be insured at all times and at its own expense the Collateral
against loss, fire, theft, pilferage, or otherwise, for the full insurance value
payable to the Lender as its interest in the Collateral may appear, and it shall
endorse and deliver the policy or policies of insurance to the Lender, and in
default thereof, the Lender may, at its option, insure the Collateral and any
and all sums so paid by the Lender for such insurance shall be repayable with
interest thereon at the same interest rate as being imposed under this Agreement
and shall be considered covered by herein mortgage. It is clearly understood
that the Lender has the right to see and inspect the Collateral to find out
their state or condition, upon a prior written notice of at least 24 hours
submitted to the Borrower and only to be conducted during regular business hours
from 9:00 am to 5:00 pm.

 

(d) The Borrower shall not, during the existence of the mortgage, encumber with
a second mortgage the Collateral, or any part thereof, without the written
consent of the Lender.

 

(e) The Borrower may sell or dispose of the Collateral, provided the Borrower
shall have the consent of the Lender (which consent shall not be unreasonably
withheld) and immediately replace the Collateral with other real property such
that at all times it is maintained that the value of the mortgage is the
outstanding amount of the Borrowing. In this case, the Borrower undertakes to
execute a new mortgage document to cover the substitute collateral. It is agreed
that the Borrower shall furnish all documentary stamps for the new Collateral
and pay all fees for the notarization and registration (if required by the
Lender) of the documents connected therewith.

 

(f) In the event the Borrower should fail to pay the Lender the sum of money or
Borrowing secured by this mortgage, or any part thereof, when due, or is in
default within the meaning of this Agreement, the Lender shall have the right at
their election, to foreclose this mortgage in accordance with Applicable Law,
and the proceeds of such sale of the mortgaged Collateral shall be applied in
accordance with Section 2.07(b).

 

(g) The Borrower agrees and undertakes to execute and deliver to a Lender such
other documents which said Lender may from time to time reasonably request from
the Borrower in connection with the mortgage.

 

(h) Effective upon the breach of any condition of this mortgage and in addition
to the remedies herein stipulated, the Lender are hereby appointed
attorneys-in-fact of the Borrower with full powers and authority, to take actual
possession of the Collateral, without the necessity of any judicial order or any
other permission or power, to sell or dispose of the Collateral or take any
other legal action that may be deemed necessary, to lease any of the Collateral
and collect rents therefor; to execute bills of sale, leases or agreements that
may be deemed convenient; to make repairs or improvements to the Collateral and
pay the same and perform any other act which the Lender may deem convenient for
the proper administration of the Collateral.

 

2.06 Loan Repayment

 

The Borrower shall fully pay and liquidate the Loan within two (2) years from
and after the initial Drawdown date (the “Loan Repayment Date”).

 

In case of multiple loan drawdowns, the repayment schedule of any succeeding
drawdown shall coincide with the repayment schedule of the initial drawdown.

 

2.07 Payments

 

(a) All payments to be made by the Borrower hereunder or under the Note/s or
under any document contemplated hereby shall be paid to each Lender not later
than 12:00 noon of the due date of the payment in Dollars drawn on immediately
available funds by debiting the Borrower’s designated deposit account/s.

 

(b) Any payment made to the Lender hereunder shall be applied first against
reasonable costs, expenses and indemnities due hereunder; then against
penalties; then against interest due on the Loan; then against the principal
amount of the Loan then due and payable.

 

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2.08 Voluntary Prepayment

 

The Borrower shall have the option to prepay the Loan in full or partially on
the first day of each month without any penalty chargeable against it, subject
to the following terms and conditions:

 

(a) The Borrower shall give the Lender written notice of such prepayment not
less than ten (10) days prior to the proposed prepayment date, which notice,
once given, shall be irrevocable and binding on the Borrower;

 

(b) The amount payable in respect of each prepayment shall be the full or
partial outstanding principal amount of the Loan plus any accrued but unpaid
interest, penalties and other charges (where applicable);

 

(c) Any amount prepaid may be re-borrowed hereunder.

 

2.09 Use of Proceeds

 

The Borrower agrees that it will use the proceeds of the Loan exclusively to
finance its business operations and for other general corporate uses.

 

Section 3. Funding

 

3.01 Cost and Losses

 

The Borrower shall pay the Lender for any actual and documented reasonable costs
and losses, as certified by the Lender and upon submission by Lender of proof of
such costs and losses (without prejudice to Borrower’s right to dispute or
request clarification of the charges), in connection with the unwinding or
liquidation of any deposit, funding or financing arrangement that the Lender may
in good faith incur as a result of (i) any Borrowing not being made due to the
failure of the Borrower to satisfy the applicable conditions specified in
Section 6 of this Agreement on the proposed Drawdown date, or (ii) the default
by the Borrower in the payment of the interest accrued thereon after the
occurrence of any Event of Default hereunder, or (iii) any prepayment of the
Loan.

 

Section 4. Fees and Charges

 

4.01 Costs and Expenses

 

(a) The Borrower shall, for its own account, pay all reasonable costs, charges
and expenses incurred in connection with the execution of the Loan Documents and
any other documentation required thereunder and/or any amendment of any of the
Loan Documents, which total reasonable costs, charges and expenses shall include
documentary stamp tax and notarial fees.

 

(b) The Borrower shall also reimburse the Lender on demand for all reasonable
and documented expenses incurred by them, including reasonable expenses and fees
of external counsel, when applicable, (i) in connection with the enforcement and
administration of the Loan Documents from and after the occurrence of an Event
of Default, or (ii) with respect to any action which may be instituted by any
person against the Lender in respect of any of the foregoing or as a result of
any transaction, action or non-action arising from the foregoing. Such expenses
shall be reimbursed whether or not the Lender gives notice of such Event of
Default or demand acceleration of the Loan or take other action to enforce the
provisions of this Agreement, unless the Lender waives the Event of Default and
in such waiver specifically waive reimbursement of administration and
enforcement expenses resulting from such waived Event of Default; provided that
in every case the Borrower shall have the right to contest prior to or after the
payment thereof the correctness or reasonableness of the expenses incurred. It
is understood that expenses shall not include representation expenses of any
kind.

 

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4.02 Non-Reimbursable Nature

 

The fees, expenses and other amounts payable by the Borrower under this Section
shall be payable by the Borrower, and, if already paid, shall not be
reimbursable by the Lender, notwithstanding the failure by the Borrower to make
any Borrowing under the Agreement or any other failure of the transactions
contemplated herein.

 

Section 5. Covenants

 

5.01 Affirmative Covenants

 

During the term of the Loan and until payment in full of all amounts due to the
Lender under this Agreement shall have been received by the Lender, the Borrower
covenants and agrees that, unless the Lender shall otherwise consent in writing,
which consent shall not be unreasonably withheld, it shall:

 

(a) Maintenance and Continuity of Business/Insurance. Maintain and preserve its
corporate existence, rights, privileges and franchises; carry out and conduct
its business in an orderly, diligent, efficient and customary manner and in
accordance with sound financial and business practices; keep all its properties
in good working order and condition, ordinary wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements and
improvements thereto and thereof so that business carried on in connection
therewith may be properly and advantageously conducted at all times; and,
maintain insurance with reputable insurers on all its properties and assets to
such extent and against such operational and other risks and liabilities as are
customary for businesses of a like or similar nature;

 

(b) Compliance with Laws/Taxes. At all times comply with or cause to be complied
with, all laws, statutes, rules, regulations, orders and directives, judgments,
indentures, mortgages, deeds of trust, agreements and other instruments,
arrangements, obligations and duties to which it is subject or by which it is
legally bound where non-compliance would materially and adversely affect the
Borrower’s ability to duly perform and observe its obligations and duties under
the Agreement; and timely file tax returns which to its knowledge are required
to be filed and pay all taxes due in respect of the ownership of its properties
and assets or the conduct of its operations;

 

(c) Indebtedness and Contractual and Other Obligations. Promptly as practicable,
(i) duly pay and discharge all indebtedness and perform all contractual
obligations in accordance with their terms; (ii) duly pay and discharge all
taxes, assessments and governmental charges of whatever nature validly and
legally levied upon or against it or against its properties and business prior
to the date on which penalties attach thereto; and, (iii) duly pay and discharge
all lawful claims for labor, materials, supplies, services, or otherwise which
might or could, if unpaid, become a lien or charge upon the properties or assets
of the Borrower, unless and to the extent only that the same shall be contested
in good faith and by appropriate proceedings diligently conducted by the
Borrower, and take such steps as may be necessary in order to prevent its
properties or any part thereof from being subjected to the possibilities of
loss, forfeiture or sale;

 

(d) Notice of Legal Proceedings/other Matters. Promptly, as practicable, give
written notice to the Lender of (i) any litigation or proceeding before any
court, tribunal, arbitrator or governmental authority affecting it or any of its
assets, including provisional reliefs such as attachments and garnishments, that
may materially and adversely affect the Borrower’s capacity to pay the Loan;
(ii) any dispute which may exist between it and any governmental authority or
any proposal by any governmental authority to acquire its business or any of its
assets, which may materially and adversely affect its operations or financial
condition; (iii) any litigation or proceeding relating to environmental matters
concerning the Borrower, that may materially and adversely affect the Borrower’s
capacity to pay the Loan; (iv) any notice of strike filed with the Department of
Labor and Employment against the Borrower which may disrupt the Borrower’s
operations and materially and adversely affect its capacity to pay the Loan; (v)
any Event of Default to the best of the Borrower’s knowledge or any event which
the Borrower is certain, upon a lapse of time or giving of a notice or both,
would become an Event of Default; (vi) any damage, destruction or loss which
might materially and adversely affect the assets, business prospects or
financial condition of the Borrower; and, (vii) any other matter which has
resulted or might result in a material adverse change in the operations or
financial condition of the Borrower;

 

6

 

(e) Additional Agreements. Execute and deliver within a reasonable time to the
Lender such additional reports, documents, and other information respecting the
business, properties, condition or operations, financial or otherwise of the
Borrower, as the Lender may reasonably require from time to time to perfect and
confirm to the Lender all their rights, powers and remedies hereunder;

 

(f) Continuing Approvals. At its own cost and expense, continue in full force
and effect (and where appropriate, promptly renew) all governmental approvals
obtained in connection with or necessary for the carrying out of its business
and its obligations under the Loan Documents; perform and observe all the
conditions and restrictions contained in, or imposed on the Borrower by, any and
all such governmental approvals; and, obtain any new or additional governmental
approvals, effect any and all registrations or filings, and take such additional
actions as are, or which may become, necessary for its business and the
performance or enforceability of the aforementioned documents;

 

(g) Environmental, Occupational and Health Safety Guidelines. Take all practical
measures to ensure that the Borrower’s business is carried out with due regard
to ecological and environmental factors and in compliance with (i) environmental
and occupational and health safety guidelines relevant to the business of the
Borrower and (ii) applicable Philippine and local environmental, occupational
and health safety laws and regulations;

 

(h) Books of Accounts and Records. Maintain true, complete and adequate books,
accounts and records and prepare all financial statements required hereunder to
reflect fairly its financial condition and results of operation in accordance
with generally accepted accounting principles and practices consistently
applied, and in compliance with the regulations of any governmental regulatory
body having jurisdiction thereof; and, as soon as available, submit to the
Lender copies of all reports, information and documents which the Borrower may
be required to file or submit to the Securities and Exchange Commission and
other governmental authority having jurisdiction over it, except only to the
extent that such reports, information or documents are, by their nature or by
express conditions, subject to confidentiality requirements;

 

(i) Use of Proceeds. Use the proceeds of the Loan for the specific purpose
stated in Section 2.09 hereof;

 

(j) Further Assurances. The Borrower shall: (i) comply with all the terms and
conditions of this Agreement and the Loan Documents, (ii) maintain satisfactory
accounting, cost control and management information systems and (iii) ensure
that all transactions with its Subsidiaries or Affiliates in the ordinary course
of business shall be executed on an arm’s length basis.

 

6.02 Negative Covenants

 

Until payment in full of all amounts due to the Lender under the Loan Documents,
the Borrower covenants and agrees that, unless the Lender shall otherwise
consent in writing, which consent shall not be unreasonably withheld, it shall
not:

 

(a) Lien. Permit any Indebtedness to be secured by or to benefit from any Lien,
in favor of any creditor or class of creditors on, or in respect of, any assets
or revenues or chattels of the Borrower which are subject to the mortgage under
this Agreement, provided however, that this shall not prohibit the following:

 

(i) liens or charges for taxes, assessment, or other governmental charges which
are not delinquent or remain payable, without any penalty, or the validity of
which is contested in good faith by appropriate proceedings, and adequate
reserves have been provided for payment thereof;

 

(ii) deposits or pledges to secure statutory obligations, surety, or appeal
bonds, bonds for release of attachment, stay of execution of injunction, or
performance bonds for bids, tenders, contracts (other than for the repayment of
borrowed money) or leases in the normal course of business; liens, pledges,
charges, and other encumbrances on the properties and assets of the Borrower (i)
imposed by law, such as carriers’ liens, warehousemen’s liens, mechanics’ liens,
unpaid vendors’ liens, and other similar liens arising in the ordinary course of
business; (ii) arising out of pledges or deposits under workmen’s compensation
laws, unemployment insurance, old age pensions, or other social security or
retirement benefits or similar legislation, or retirement benefit plans of the
Borrower; and (iii) arising out of the set-off provision on other agreements of
the Borrower relating to indebtedness;

 

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Section 7. Conditions for Borrowing

 

The obligation of the Lender to provide the Borrowing on Drawdown date hereunder
shall be subject to the fulfillment of the following terms and conditions:

 

(a) The Lender shall have received the Note/s (in the form as per attached
Exhibit “A”), duly executed by the Borrower in favor of the Lender evidencing
the Borrowing to be made on Drawdown date.

 

(b) Each of the Loan Documents shall have been duly authorized by and executed
by the parties thereto, and shall be legally binding on each of them in
accordance with their respective terms.

 

(c) The Lender shall have received copies, certified by the Corporate Secretary
of the Borrower, of the Securities and Exchange Commission Certificate of
Registration, Articles of Incorporation and By Laws or other constitutive
documents, as appropriate, of the Borrower, each as amended to date.

 

(d) The Lender shall have received such other approvals, certificates or other
document which the Lender may reasonably request from the Borrower for the
execution of the Loan documents.

 

Section 8. Default and Remedies

 

8.01 Events of Default

 

Upon the determination of the Lender, each of the following events constitutes
an Event of Default under this Agreement

 

(a) Payment Default. The Borrower fails to pay any principal or interest on the
Note/s, when due and payable in accordance with the terms thereof; or with
respect to failure to pay any amount other than the principal or interest, the
Borrower fails to pay within thirty (30) days from receipt of a payment notice
for said amount;

 

(c) Other Provisions Default. The Borrower fails to perform or comply with any
term, obligation or covenant contained in any of the Loan Documents or in any
other document/instruments related or otherwise in connection therewith which
would materially and adversely affect the ability of the Borrower to meet its
obligations under the Loan Documents and any such failure, violation,
non-compliance is not remediable or if remediable, continues unremedied for a
period of thirty (30) Days from the date after written notice thereof shall have
been given by the Lender.

 

(d) Cross-Default. Any other material obligation of the Borrower for borrowed
money, deferred purchase price or monetary obligation is not paid when due and
after giving effect to any applicable grace period and, in general, any default
in the performance or observance of any instrument, contract or agreement
pursuant to which any other obligation of the Borrower was created, unless
contested in good faith, which default shall result in the acceleration or
declaration of the whole obligation thereunder to be due and payable prior to
the stated normal date of maturity.

 

(e) Insolvency Default. The Borrower becomes insolvent or unable to pay its
debts when due or commits or permits any act of bankruptcy, which act shall
include (i) the filing of a petition in any bankruptcy, reorganization, winding
up or liquidation of the Borrower, or any other proceeding analogous in purpose
and effect: Provided, however, that in case the foregoing petition is filed by
any other party, other than the Borrower, such event shall be considered a
Declared Event of Default if such petition is not dismissed or decided in favor
of the company within a period of sixty (60) Days, from the date of filing
thereof, (ii) the making of an assignment by the Borrower for the benefit of its
creditors, (iii) the admission in writing by the Borrower of its inability to
pay its debts, or (iv) the entry of any order or judgment of any court, tribunal
or administrative agency or body confirming the bankruptcy or insolvency of the
Borrower or approving any reorganization, winding up or liquidation of the
Borrower, or (v) the appointment of a receiver, liquidator, assignee, trustee,
or sequestrator of the Borrower or a substantial part of its property or assets
or a substantial part of its capital stock or to assume custody or control of
the Borrower or the ordering of its dissolution, winding-up or liquidation of
its affairs.

 

(f) Event or Condition Affecting Loan Documents. Any event, condition, or
circumstance (including, without limitation, any change in the economic or
financial condition of the Borrower) shall occur which, in the reasonable
determination of the Lender, shall have a material and adverse effect on the
business, assets, prospects, condition or operations of the Borrower, or which
shall materially and adversely affect the Borrower’s ability to duly perform and
observe, or to meet in the normal course, any of its obligations and duties
under the Loan Documents;

 

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8.02 Consequences of Events of Default

 

If an Event of Default shall have occurred, then at any time thereafter, if any
such event shall then be continuing, and not remedied during the curing period
(where it is provided for), the Lender at its option, upon written notice to the
Borrower, except in case of a payment default where no notice is necessary, may:

 

(a) Declare the Commitment to be terminated, whereupon, the obligation of the
Lender to make or maintain the Loan hereunder shall forthwith terminate;

 

(b) Accelerate payment and declare the entire unpaid principal amount of the
Loan then outstanding, all interest accrued and unpaid thereon and all other
amounts payable hereunder to be forthwith due and payable, whereupon all such
amounts shall become and be forthwith due and payable without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; and

 

(c) Take such other judicial steps or actions against the Borrower as the Lender
may deem necessary and proper for the full protection and enforcement of its
rights and interests. The foregoing provisions notwithstanding, the Lender shall
likewise have the right to exercise all other legal rights and remedies which
may now or hereafter be available to them under Applicable Law.

 

Section 9. Additional Conditions

 

9.01 Attorney’s Fees and Expenses

 

The Borrower shall reimburse the Lender on demand for all reasonable attorney’s
fees and expenses, including without limitation, filing fees and fees and
expenses of counsel incurred in the enforcement of any of the Loan Documents
from and after the occurrence of an Event of Default. Such expenses shall be
reimbursed whether or not they arise during the term of this Agreement, or the
Lender demand acceleration of the Loan or take other action (including judicial
remedies) to enforce the provisions of the Agreement. It is hereby agreed and
understood that the amounts that may be reimbursable under this Section 9.01 are
only those that were actually incurred by the Lender and supported by proper
documentation and/or receipts, provided that, in the case of attorney’s fees,
the reimbursable amount shall in no case exceed the equivalent of five percent
(5%) of the outstanding principal balance of the Borrowing.

 

9.02 Waiver and Cumulative Rights

 

No failure or delay on the part of the Lender in exercising any right, power or
remedy accruing to them upon any breach or default of the Borrower under this
Agreement shall impair any such right, power or remedy nor shall it be construed
as a waiver of any breach or default thereafter occurring, nor shall a waiver of
any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring, nor shall any single or partial exercise of
any such right or power preclude any other or further exercise thereof or the
exercise of any other right or power hereunder. Any waiver, permit, consent or
approval of any kind or character on the part of the Lender of any breach of any
provision or condition of this Agreement must be in writing and shall be
effective only to the extent such writing specifically sets forth. All remedies
afforded the Lender under this Agreement by law or otherwise shall be cumulative
and not alternative. No notice to or demand on the Borrower in any case shall
entitle it to any other or further notice or demand in similar or other
circumstances.

 

9.03 Venue of Suit

 

The Borrower irrevocably agrees that any legal action, suit or proceeding
arising out of or relating to this Agreement may be instituted in any competent
court in Las Vegas, Nevada, and by execution and delivery of this Agreement, the
Borrower submits to and accepts with regard to any such action or proceeding for
itself and in respect of its properties or assets, generally and
unconditionally, the jurisdiction of any such court. Notwithstanding the
foregoing, the right of the Borrower to bring suits, actions or proceedings
arising out of or relating to this Agreement in the courts of any other
competent jurisdiction shall not be affected.

 

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9.04 Governing Law

 

This Agreement, the Note/s, the Loan Documents and all other instruments
pertaining hereto shall be governed by and construed in accordance with the laws
of the State of Nevada.

 

9.05 Separability of Provisions

 

If any provision or provisions contained in this Agreement or any document
executed in connection herewith shall be declared by any court of competent
jurisdiction as invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the remaining
provisions contained herein not otherwise so declared shall remain in full force
and effect and shall be enforceable in such manner as may be provided by law.

 

9.06 Assignment

 

This Agreement shall be binding upon and shall be enforceable on the Borrower
and the Lender and their respective successors and assigns, provided that the
Borrower shall have no right to assign or transfer its rights or obligations
hereunder without the prior written consent of the Lender, which approval shall
not be unreasonably withheld.

 

9.07 Entire Agreement and Amendments

 

This Agreement and the documents referred to herein constitute the entire
agreement of the parties with respect to the subject matter hereof and shall
supersede any prior expressions of intent or understanding with respect to this
transaction. Any amendment to this Agreement shall require the written consent
of all of the Parties to this Agreement.

 

9.08 Notices

 

All communications, notices, statements and requests required under this
Agreement shall be made in writing and shall be deemed to have been duly given
and sufficient under the following conditions: (i) on the date of receipt if
delivered personally, (ii) ten (10) Banking Days after posting date or the date
of receipt, whichever is earlier, if transmitted by mail, or (iii) two (2)
Banking Days from the date of transmittal with confirmed answer back or the date
of confirmation of transmittal, if transmitted by facsimile or telex or email,
whichever shall first occur. All notices shall be sent to the addresses as any
party hereto may designate by written notice to the other party hereto.

 

9.09 Force Majeure

 

In the event that as a result of fire, typhoon, earthquake, act of government or
state, war, civil commotion, insurrection or any other event which is beyond the
control of the Borrower, the Borrower’s conduct of its business or operations is
severely curtailed in such manner as to materially and adversely affect its
ability to meet its obligations under this Agreement, the Borrower may notify
the Lender of the said fact in writing within fifteen (15) Days from the
occurrence of the event and request for a meeting with the Lender to discuss the
Borrower’s circumstances and situation. The Lender are obliged to attend the
requested meeting and other meetings scheduled in relation to this, discuss the
circumstances and situation of the Borrower and exert all efforts in good faith
to assist the Borrower in minimizing the effects of the force majeure event.

 

9.10 Counterparts

 

This Agreement may be signed in any number of counterparts. Any single
counterpart or a set of counterparts signed, in either case, by the parties
hereto shall constitute a full and original agreement for all purposes.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective duly authorized officers on the date and at the
place indicated below.

 

Borrower

  

\s\ Llorn Kylo

By: Llorn Kylo

 

Its: CEO 

Lender

  

\s\ Andrew Godfrey

By: Andrew Godfrey

 

Its: Director 

 

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 Exhibit A

 

CANNABIS-RX INC.

5% PROMISSORY NOTE

Principal Amount: $_______________ Original Issuance Date: [___] 2014

FOR VALUE RECEIVED Cannabis-Rx Inc., a Delaware corporation (the “Company”),
promises to pay to [___] (“Holder”), the principal amount of [___] ($___)
together with all accrued but unpaid interest, or such lesser amount as shall
equal the then outstanding principal amount hereof together with all accrued but
unpaid interest thereon, payable on the Loan Repayment Date.

The following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder, by the
acceptance of this Note, agrees:

1.                  Interest.

(a) Interest shall accrue on the unpaid principal balance of this Note at the
rate of five percent (5%) per annum. Interest shall be calculated from and
include the date hereof and shall be calculated on an actual/360-day basis. All
accrued but unpaid interest shall be due and payable on the Loan Repayment Date.

 

(b) Notwithstanding anything to the contrary contained herein, in no event shall
this or any other provision herein permit the collection of any interest which
would be usurious under applicable law. If under any circumstances, whether by
reason of advancement or acceleration of the maturity of the unpaid principal
balance hereof or otherwise, the aggregate amounts paid under this Note shall
include amounts which by law are deemed interest and which would exceed the
maximum rate permitted by law, the Company stipulates that payment and
collection of such excess amounts shall have been and will be deemed to have
been the result of a mistake on the part of both Holder and the Company or the
holder of this Note, and the party receiving such excess payments shall promptly
credit such excess (only to the extent such payments are in excess of the
maximum rate) against the unpaid principal balance hereof and any portion of
such excess payments not capable of being so credited shall be refunded to the
Company.

 

2.                  Event of Default.

(a)                For purposes of this Note, an “Event of Default” means:

(i)                 the Company shall default in any payment of principal and/or
accrued interest on this Note when due; or

(ii)               the Company shall fail to materially perform any covenant,
term, provision, condition, agreement or obligation of the Company under this
Note (other than for non-payment) and such failure shall continue uncured for a
period of ten (10) business days after notice from the Holder of such failure;
or

(iii)             the Company shall (a) become insolvent; (b) admit in writing
its inability to pay its debts generally as they mature; (c) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; or (d)
apply for or consent to the appointment of a trustee, liquidator, receiver or
similar official for it or for a substantial part of its property or business;
or

(iv)             a trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within thirty (30) days after such
appointment; or

(v)               any governmental agency or any court of competent jurisdiction
at the insistence of any governmental agency shall assume custody or control of
the whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within thirty (30) days thereafter; or

(vi)             bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy law or any law
for the relief of debt shall be instituted by or against the Company and, if
instituted against the Company shall not be dismissed within thirty (30) days
after such institution, or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit to any material
allegations of, or default in answering a petition filed in any such proceeding;
or

(vii)           the Company shall fail to pay when due or otherwise be in
material default of any of its indebtedness that gives the holder thereof the
right to accelerate such indebtedness.

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(b)               Upon the occurrence of an Event of Default, the entire unpaid
and outstanding indebtedness due under this Note shall be immediately due and
payable without notice.

(c)                Upon the occurrence of an Event of Default, this Note shall
bear interest at the rate of twelve percent (12%) per annum from the date of the
Event of Default.

(d)               As soon as possible and in any event within 2 days after the
Company becomes aware that an Event of Default has occurred, the Company shall
notify the Holder in writing of the nature, extent and time of and the facts
surrounding such Event of Default, and the action, if any, that the Company
proposes to take with respect to such Event of Default.

2. Prepayment. The Company may prepay this Note at any time, in whole or in
part, without penalty or premium.

3. Miscellaneous.

(a) Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note and delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company and , in the case of
mutilation, on surrender and cancellation of this Note (or what remains
thereof), the Company shall execute and deliver, in lieu of this Note, a new
note executed in the same manner as this Note, in the same principal amount as
the unpaid principal amount of this Note and dated the date of this Note.

(b) Payment. All payments under this Note shall be made in lawful tender of the
United States no later than 5:30 pm, Eastern Standard Time, on the date on which
such payment is due, by wire transfer of immediately available funds to the
account identified by the Holder.

(c) Waivers. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.

(e)                Waiver and Amendment. Any provision of this Note may be
amended, waived or modified only by an instrument in writing signed by the party
against which enforcement of the same is sought.

(f)                Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing sent by mail, facsimile with
printed confirmation, nationally recognized overnight carrier or personal
delivery and shall be effective upon actual receipt of such notice, to the
following addresses until notice is received that any such address or contact
information has been changed:

To the Company:

Cannabis-Rx Inc.

7702 E Doubletree Ranch Rd – Ste 300

Scottsdale, AZ 85258

Facsimile:____________

 

To Holder:

 

Facsimile:____________

 

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(g)               Expenses; Attorneys’ Fees. If action is instituted to enforce
or collect this Note, the Company promises to pay or reimburse all reasonable
costs and expenses, including, without limitation, reasonable attorneys’ fees
and costs, incurred by the Holder in connection with such action.

(h)               Successors and Assigns. This Note may be assigned or
transferred by the Holder with the written consent of the Company. Subject to
the preceding sentence, the rights and obligations of the Company and the Holder
of this Note shall be binding upon and benefit the successors, permitted
assigns, heirs, administrators and permitted transferees of the parties.

(i)                 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising on the part of the Holder, any right, option, remedy,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, option, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, option, remedy, power or privilege. The rights, options, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, options, remedies, powers and privileges provided by law.

(j)                 Governing Law; Jurisdiction. THE PARTIES HEREBY AGREE THAT
THIS NOTE IS MADE AND ENTERED INTO IN THE STATE OF NEVDA AND FURTHER AGREE THAT
ALL ACTS REQUIRED BY THIS NOTE AND ALL PERFORMANCE HEREUNDER ARE INTENDED TO
OCCUR IN THE STATE OF NEVADA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAWS. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE PERSONAL AND SUBJECT MATTER JURISDICTION OF THE STATE OR FEDERAL
COURTS OF THE STATE OF NEVADA OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS NOTE. EACH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY LAW, (A) ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT;
AND (B) ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. FINAL JUDGMENT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT SHALL BE CONCLUSIVE AND BINDING UPON EACH PARTY DULY SERVED
WITH PROCESS THEREIN AND MAY BE ENFORCED IN THE COURTS OF THE JURISDICTION OF
WHICH EITHER PARTY OR ANY OF THEIR PROPERTY IS SUBJECT, BY A SUIT UPON SUCH
JUDGMENT. THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY.

IN WITNESS WHEREOF, the Company has caused this Note to be executed as of the
date first above written by its duly authorized officer.

Cannabis-Rx Inc.

By:
Name:
Title:

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