MASTER CONVERTIBLE PROMISSORY NOTE

 

Effective Date: September 18, 2014 U.S. $64,500.00

 

FOR VALUE RECEIVED, Rich Pharmaceuticals, Inc., a Nevada corporation
(“Borrower”), promises to pay to Typenex Co-Investment, LLC, a Utah limited
liability company, or its successors or assigns (“Lender”), $64,500.00 and any
interest, fees, charges and penalties in accordance with the terms set forth
herein. This Master Convertible Promissory Note (this “Master Note”) is issued
and made effective as of September 18, 2014 (the “Effective Date”). For purposes
hereof, the “Outstanding Balance” of each Note (as defined below) means the
Purchase Price (as defined below) of such Note, as reduced or increased, as the
case may be, pursuant to the terms hereof for redemption, conversion or
otherwise, plus any original issue discount (“OID”), accrued but unpaid
interest, collection and enforcements costs, and any other fees or charges
(including without limitation late charges) incurred under each such Note.

 

The purchase price for this Master Note is $55,000.00 (the “Purchase Price”)
payable by wire transfer. The initial Outstanding Balance of this Master Note
shall include the Purchase Price, a $5,500.00 OID, and $4,000.00 to cover
Lender’s legal fees, accounting costs, due diligence, monitoring and other
transaction costs incurred in connection with the purchase and sale of the Notes
(as defined below). Borrower agrees that this Master Note is fully paid for as
of the Effective Date.

 

Lender may, with Borrower’s consent, lend additional funds to Borrower in up to
two (2) additional tranches, each in the amount of $55,000.00 (each a
“Tranche”), at any time or from time to time beginning on the Effective Date and
ending one year from the date that the entire Outstanding Balance of the most
recently funded Note has been repaid (the “Option Expiration Date”). On the
Effective Date, Borrower will execute and issue each of the two (2) Subsequent
Promissory Notes attached hereto as Exhibit A (each, a “Subsequent Note”, and
together with the Master Note, the “Notes”, and each of the Notes individually,
a “Note”). Each Subsequent Note shall have an initial Outstanding Balance of
$60,500.00, consisting of $55,000.00 payable by wire and a $5,500.00 OID.
Subject to Borrower’s consent right as set forth above, each of the Subsequent
Notes shall be deemed issued by Lender on the Effective Date; provided, however,
that no Subsequent Note shall be considered a valid, binding or enforceable
obligation of Borrower until Lender delivers to Borrower: (i) the Purchase Price
for the applicable Subsequent Note, and (ii) a copy of the applicable Subsequent
Note (with applicable blanks filled in by Lender) (the “Effective Conditions”).
Borrower agrees in advance that upon Lender’s satisfaction of the Effective
Conditions with respect to a Subsequent Note, and subject to Borrower’s consent
right as set forth above, that such Subsequent Note shall automatically become
an unconditional, valid, binding and enforceable obligation of Borrower not
subject to offset, deduction or counterclaim of any kind. Each Subsequent Note
shall be considered a separate instrument from this Master Note and each other
Subsequent Note.

 

This Master Note and each Subsequent Note shall have its own separate maturity
date, which shall be the date that is one year from the date the Purchase Price
is paid (the “Purchase Price Date”) for such Note (the “Maturity Date”). On each
separate Maturity Date, the applicable Outstanding Balance shall be due and
payable. Borrower and Lender agree that for Rule 144 purposes each Subsequent
Note shall be considered fully paid and the applicable holding period shall
begin on the date Lender satisfies the Effective Conditions with respect to such
Subsequent Note. The terms of each Subsequent Note are incorporated by reference
and made a part of this Master Note. In the case of any conflict between this
Master Note and any Subsequent Note, the terms of this Master Note shall govern
except with respect to any terms expressly supplied by such Subsequent Note.

 

Subject to the adjustments described in this paragraph, and provided that no
Event of Default (as defined below) has occurred, the conversion price for each
Note shall be 60% (the “Conversion Factor”) of the average of the three (3)
lowest Closing Bid Prices of Borrower’s common stock (“Common Stock”) in the
twenty (20) Trading Days immediately preceding the Conversion (as defined below)
(the “Conversion Price”), provided that if at any time the average of the three
(3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately
preceding any date of measurement is below $0.03, then in such event the
then-current Conversion Factor shall be reduced to 55% for all future
Conversions under all Notes. Additionally, if at any time after the Effective
Date, Borrower is not DWAC Eligible, then the Conversion Factor will
automatically be reduced by 5% for all future Conversions under all Notes. If at
any time after the Effective Date, Borrower is not DTC Eligible, then the
Conversion Factor will automatically be reduced by an additional 5% for all
future Conversions under all Notes.

 

1.                  Interest. Borrower may repay any Note at any time on or
before the date that is 90 days from the applicable Purchase Price Date (the
“Prepayment Opportunity Date”). If Borrower repays a Note on or before the
Prepayment Opportunity Date, the interest rate shall be ZERO PERCENT (0%). If
Borrower does not repay the entire Outstanding Balance of the applicable Note on
or before the applicable Prepayment Opportunity Date, a one-time interest charge
of 12% (the “Interest Charge”) shall be applied to the Outstanding Balance of
such Note. Any interest payable is in addition to any applicable OID. Any OID
remains payable regardless of the time and manner of payment by Borrower.
Following the Prepayment Opportunity Date of each Note, such Note may only be
prepaid by Borrower with the prior written consent of Lender. If Lender consents
to Borrower’s prepayment of all or any portion of a Note, Borrower shall pay to
Lender 125% of the portion of the Outstanding Balance of such Note that Lender
allows Borrower to prepay.

 

2.                  Conversion. Lender has the right at any time after the
Effective Date, at its election, to convert (each instance of conversion is
referred to herein as a “Conversion”) all or any part of the Outstanding Balance
of such Note into shares (“Conversion Shares”) of fully paid and non-assessable
Common Stock as per the following conversion formula: the number of Conversion
Shares equals the amount being converted (the “Conversion Amount”) divided by
the Conversion Price. Conversion notices in substantially the form attached
hereto as Exhibit B (each, a “Conversion Notice”) under any of the Notes may be
effectively delivered to Borrower by any method of Lender’s choice (including
but not limited to facsimile, email, mail, overnight courier, or personal
delivery), and all Conversions shall be cashless and not require further payment
from Lender. If no objection is delivered from Borrower to Lender regarding any
variable or calculation of the Conversion Notice within 24 hours of delivery of
the Conversion Notice, Borrower shall have been thereafter deemed to have
irrevocably confirmed and irrevocably ratified such Conversion Notice and waived
any objection thereto. Borrower shall deliver the Conversion Shares from any
Conversion to Lender within three (3) business days of Lender’s delivery of the
Conversion Notice to Borrower (the “Delivery Date”).

 

3.                  Conversion Delays. If Borrower fails to deliver Conversion
Shares in accordance with the timeframes stated in Section 2, Lender, at any
time prior to selling all of those Conversion Shares, may rescind in whole or in
part that particular Conversion attributable to the unsold Conversion Shares,
with a corresponding increase to the applicable Outstanding Balance (any
returned Conversion Amount will tack back to the Purchase Price Date of the
applicable Note). In addition, for each Conversion, in the event that Conversion
Shares are not delivered by the Delivery Date, a late fee equal to $1,000.00 per
day (but in any event the cumulative amount of such late fees for each
Conversion shall not exceed 200% of the applicable Conversion Amount).

 

 

 

 

4.                  Reservation of Shares. At all times during which any Note is
convertible, Borrower will reserve from its authorized and unissued Common Stock
to provide for the issuance of Common Stock upon the full conversion of all
outstanding Notes. Borrower will at all times reserve at least three (3) times
the number of shares of Common Stock necessary to convert the total Outstanding
Balance of each of the outstanding Notes, plus all accrued interest, penalties
and fees, as of any given date (the “Share Reserve”), but in no event shall less
than 7,000,000 shares of Common Stock be reserved for such purpose (the
“Transfer Agent Reserve”). Borrower further agrees that it will cause its
transfer agent to immediately add shares of Common Stock to the Transfer Agent
Reserve in increments of 1,000,000 shares as and when requested by Borrower or
Lender in writing from time to time, provided that such incremental increases do
not cause the Transfer Agent Reserve to exceed the Share Reserve. In furtherance
thereof, from and after the date hereof and until such time that the Notes have
been paid in full, Borrower shall require its transfer agent to reserve for the
purpose of issuance to Lender pursuant to conversions under the Notes a number
of shares of Common Stock equal to the Transfer Agent Reserve. Borrower shall
further require its transfer agent to hold such shares of Common Stock
exclusively for the benefit of Lender and to issue such shares to Lender
promptly upon Lender’s delivery of a conversion notice under a Note.

 

5.                  Borrower Representations and Warranties. Borrower represents
and warrants to Lender that, as of the date hereof: (i) Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has the requisite corporate power to own its
properties and to carry on its business as now being conducted; (ii) Borrower is
duly qualified as a foreign corporation to do business and is in good standing
in each jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary; (iii) Borrower has registered
its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the “1934 Act”), and is obligated to file reports pursuant to
Section 13 or Section 15(d) of the 1934 Act; (iv) the Master Note, the
Subsequent Notes and the transactions contemplated hereby and thereby, have been
duly and validly authorized by Borrower; (v) the Master Note has been duly
executed and delivered by Borrower and constitutes the valid and binding
obligation of Borrower enforceable in accordance with its terms, subject as to
enforceability only to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors’ rights generally; (vi) each Subsequent Note has been duly executed
and delivered by Borrower and upon receipt of the Purchase Price for any
Subsequent Note, such Subsequent Note shall constitute the valid and binding
obligation of Borrower enforceable in accordance with its terms, subject as to
enforceability only to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors’ rights generally; (vii) the execution and delivery of the Notes by
Borrower, the issuance of Conversion Shares in accordance with the terms hereof,
and the consummation by Borrower of the other transactions contemplated by the
Notes do not and will not conflict with or result in a breach by Borrower of any
of the terms or provisions of, or constitute a default under (a) Borrower’s
formation documents or bylaws, each as currently in effect, (b) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
Borrower is a party or by which it or any of its properties or assets are bound,
including any listing agreement for the Common Stock except as herein set forth,
or (c) to Borrower’s knowledge, any existing applicable law, rule, or regulation
or any applicable decree, judgment, or order of any court, United States federal
or state regulatory body, administrative agency, or other governmental body
having jurisdiction over Borrower or any of Borrower’s properties or assets;
(viii) no authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange or market or
the stockholders or any lender of Borrower is required to be obtained by
Borrower for the issuance of the Notes and Conversion Shares to Lender, except
such authorizations, approvals and consents that have been obtained; (ix) none
of Borrower’s filings with the SEC contained, at the time they were filed, any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading; (x)
Borrower has filed all material reports, schedules, forms, statements and other
documents required to be filed by Borrower with the SEC under the 1934 Act on a
timely basis or has received a valid extension of such time of filing and has
filed any such report, schedule, form, statement or other document prior to the
expiration of any such extension; (xi) Borrower is not now and has not been at
any time in the previous twelve (12) months a “Shell Company,” as such type of
“issuer” is described in Rule 144(i)(1) under the 1933 Act; (xii) with respect
to any brokerage commissions, placement agent or finder’s fees or similar
payments that will or would become due and owing by Borrower to any person or
entity as a result of this Master Note or the transactions contemplated hereby
(“Broker Fees”), any such Broker Fees will be made in full compliance with all
applicable laws and regulations and only to a person or that is a registered
investment adviser or registered broker-dealer; and (xiii) Lender shall have no
obligation with respect to any such Broker Fees or with respect to any claims
made by or on behalf of other persons or entities for fees of a type
contemplated herein that may be due in connection with the transactions
contemplated hereby and Borrower shall indemnify and hold harmless each of
Lender, Lender’s employees, officers, directors, stockholders, managers, agents,
and partners, and their respective affiliates, from and against all claims,
losses, damages, costs (including the costs of preparation and attorneys’ fees)
and expenses suffered in respect of any such claimed or existing fees.

6.                  Borrower Covenants. Until all of Borrower’s obligations
hereunder are paid and performed in full, or within the timeframes otherwise
specifically set forth below, Borrower shall comply with the following
covenants: (i) from the date hereof until all the Conversion Shares either have
been sold by Lender, or may permanently be sold by Lender without any
restrictions pursuant to Rule 144, Borrower shall timely make (including the
benefit of any extension) all filings required to be made by it under the
Securities Act of 1933 (the “1933 Act”), the 1934 Act, Rule 144 or any United
States securities laws and regulations thereof applicable to Borrower or by the
rules and regulations of its principal trading market, and such filings shall
conform to the requirements of applicable laws, regulations and government
agencies, and, unless such filings are publicly available on the SEC’s EDGAR
system (via the SEC’s web site at no additional charge), Borrower shall provide
a copy thereof to Lender promptly after such filings; (ii) so long as Lender
beneficially owns any Note or Conversion Shares and for at least twenty (20)
Trading Days thereafter, Borrower shall file all reports required to be filed
with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take
all reasonable action under its control to ensure that adequate current public
information with respect to Borrower, as required in accordance with Rule 144,
is publicly available, and shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination; (iii) the Common Stock
shall be listed or quoted for trading on any of (a) the NYSE Amex, (b) the New
York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital
Market, (e) the OTC Bulletin Board, (f) the OTCQX or (g) the OTCQB or (h) the
OTC Markets; and (iv) Borrower shall use the net proceeds received under any of
the Notes for working capital and general corporate purposes only.

 

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7.                  Default.

 

7.1.            Events of Default. The following are events of default under the
Notes (each, an “Event of Default”): (i) Borrower shall fail to pay any
principal, interest, fees, charges or any other amount when due and payable
hereunder; or (ii) Borrower shall fail to deliver any Conversion Shares on or
before the Delivery Date in accordance with the terms hereof; or (iii) a
receiver, trustee or other similar official shall be appointed over Borrower or
a material part of its assets and such appointment shall remain uncontested for
twenty (20) days or shall not be dismissed or discharged within sixty (60) days;
or (iv) Borrower shall become insolvent or generally fails to pay, or admits in
writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any; or (v) Borrower shall make a general
assignment for the benefit of creditors; or (vi) Borrower shall file a petition
for relief under any bankruptcy, insolvency or similar law (domestic or
foreign); or (vii) an involuntary proceeding shall be commenced or filed against
Borrower; or (viii) Borrower, at any time after the Effective Date, is not DWAC
Eligible; or (ix) Borrower shall become delinquent in its filing requirements as
a fully-reporting issuer registered with the SEC and such delinquency will
continue for a period of five (5) days after the extended due date for such
filing; or (x) Borrower shall fail to observe or perform any covenant,
obligation, condition or agreement of Borrower contained herein, including
without limitation all covenants to timely file all required quarterly and
annual reports and any other filings related to Rule 144 (other than those
specifically set forth in this Section 7.1); or (xi) any representation,
warranty or other statement made or furnished by or on behalf of Borrower to
Lender herein or in connection with the issuance of the Notes shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished; or (xii) Borrower shall fail to maintain the Share Reserve; or (xiii)
Borrower effectuates a reverse split of its Common Stock without twenty (20)
Trading Days prior written notice to the Borrower; or (xiv) except with respect
to any litigation disclosed in the Borrower’s SEC filings, any money judgment,
writ or similar process shall be entered or filed against the Borrower or any
subsidiary of the Borrower or any of its property or other assets for more than
$100,000, and shall remain unvacated, unbonded or unstayed for a period of
twenty (20) calendar days unless otherwise consented to by the Lender.

 

7.2.            Cross Default. A breach or default by Borrower of any covenant
or other term or condition contained in any of the Notes or Other Agreements (as
defined below) shall, at the option of Lender, be considered an Event of Default
under each Note, in which event Lender shall be entitled (but in no event
required) to apply all rights and remedies of Lender under the terms of the
Notes. “Other Agreements” means, collectively, all existing and future
agreements and instruments between, among or by Borrower (or an affiliate), on
the one hand, and Lender (or an affiliate), on the other hand. For the avoidance
of doubt, all existing and future loan transactions between Borrower and Lender
and their respective affiliates will be cross-defaulted with each other loan
transaction and with all other existing and future debt of Borrower to Lender.

 

8.                  Remedies. Upon the occurrence of any Event of Default,
Borrower shall within one (1) Trading Day after Borrower becomes aware or should
have become aware of such Event of Default deliver written notice thereof via
facsimile, email or reputable overnight courier (with next day delivery
specified) (an “Event of Default Notice”) to Lender. At any time and from time
to time after the earlier of Lender’s receipt of an Event of Default Notice and
Lender becoming aware of the occurrence of any Event of Default, Lender may
accelerate all the Notes for which the applicable Purchase Price has been paid
by written notice to Borrower, with the Outstanding Balance of each such Note
becoming immediately due and payable in cash at the Mandatory Default Amount.
Notwithstanding the foregoing, at any time following the occurrence of any Event
of Default, Lender may, at its option, elect to increase the Outstanding Balance
by applying the Default Effect (subject to the limitation set forth below) via
written notice to Borrower without accelerating the Outstanding Balance, in
which event the Outstanding Balance shall be increased as of the date of the
occurrence of the applicable Event of Default pursuant to the Default Effect,
but the Outstanding Balance shall not be immediately due and payable unless so
declared by Lender (for the avoidance of doubt, if Lender elects to apply the
Default Effect pursuant to this sentence, it shall reserve the right to declare
the Outstanding Balance immediately due and payable at any time and no such
election by Lender shall be deemed to be a waiver of its right to declare the
Outstanding Balance immediately due and payable as set forth herein unless
otherwise agreed to by Lender in writing). Notwithstanding the foregoing, upon
the occurrence of any Event of Default described in clauses (iii), (iv), (v),
(vi) or (vii) of Section 7.1, each Outstanding Balance as of the date of
acceleration shall become immediately and automatically due and payable in cash
at the Mandatory Default Amount, without any written notice required by Lender.
At any time following the occurrence of any Event of Default, upon written
notice given by Lender to Borrower, interest shall accrue on the Outstanding
Balance beginning on the date the applicable Event of Default occurred at an
interest rate equal to the lesser of 22% per annum or the maximum rate permitted
under applicable law (“Default Interest”). Additionally, following the
occurrence of any Event of Default, Borrower may, at its option, pay any
Conversion in cash instead of Conversion Shares by paying to Lender on or before
the applicable Delivery Date a cash amount equal to the number of Conversion
Shares set forth in the applicable Conversion Notice multiplied by the highest
intra-day trading price of the Common Stock that occurs during the period
beginning on the date the applicable Event of Default occurred and ending on the
date of the applicable Conversion Notice. In connection with such acceleration
described herein, Lender need not provide, and Borrower hereby waives, any
presentment, demand, protest or other notice of any kind, and Lender may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by Lender at any
time prior to payment hereunder and Lender shall have all rights as a holder of
the Note until such time, if any, as Lender receives full payment pursuant to
this Section 8. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon. Nothing herein shall
limit Lender’s right to pursue any other remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to Borrower’s failure to timely deliver
Conversion Shares upon Conversion of the Notes as required pursuant to the terms
hereof.

 

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9.                  Effect of Certain Events.

 

9.1.            Adjustment Due to Distribution. If Borrower shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to Borrower’s stockholders in
cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then Lender shall be entitled, upon any
conversion of this Note after the date of record for determining stockholders
entitled to such Distribution, to receive the amount of such assets which would
have been payable to Lender with respect to the shares of Common Stock issuable
upon such conversion had Lender been the holder of such shares of Common Stock
on the record date for the determination of stockholders entitled to such
Distribution.

 

9.2.            Adjustments for Stock Split. Notwithstanding anything herein to
the contrary, any references to share numbers or share prices shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction.

 

10.              No Offset. Borrower acknowledges that this Master Note is an
unconditional, valid, binding and enforceable obligation of Borrower not subject
to offset, deduction or counterclaim of any kind. Borrower hereby waives any
rights of offset it now has or may have hereafter against Lender, its successors
and assigns, and agrees to make the payments or conversions called for herein in
accordance with the terms of the Notes.

 

11.              Ownership Limited to 9.99% of Common Stock Outstanding.
Notwithstanding anything to the contrary contained in any of the Notes (except
as set forth below in this section), the Notes shall not be convertible by
Lender, and Borrower shall not effect any conversion of the Notes or otherwise
issue any shares of Common Stock pursuant to Section 2 hereof, to the extent
(but only to the extent) that Lender together with any of its affiliates would
beneficially own in excess of 9.99% (the “Maximum Percentage”) of the
Common Stock outstanding. To the extent the foregoing limitation applies, the
determination of whether a Note shall be convertible (vis-à-vis other
convertible, exercisable or exchangeable securities owned by Lender or any of
its affiliates) and of which such securities shall be convertible, exercisable
or exchangeable (as among all such securities owned by Lender and its
affiliates) shall, subject to such Maximum Percentage limitation, be determined
on the basis of the first submission to Borrower for conversion, exercise or
exchange (as the case may be). No prior inability to convert a Note, or to issue
shares of Common Stock, pursuant to this section shall have any effect on the
applicability of the provisions of this section with respect to any subsequent
determination of convertibility. The shares of Common Stock issuable to Lender
that would cause the Maximum Percentage to be exceeded are referred to herein as
the “Ownership Limitation Shares”. Borrower will reserve the Ownership
Limitation Shares for the exclusive benefit of Lender. From time to time, Lender
may notify Borrower in writing of the number of the Ownership Limitation Shares
that may be issued to Lender without causing Lender to exceed the Maximum
Percentage. Upon receipt of such notice, Borrower shall be unconditionally
obligated to immediately issue such designated shares to Lender, with a
corresponding reduction in the number of the Ownership Limitation Shares. For
purposes of this section, beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with Section 13(d) of
the 1934 Act (as defined below) and the rules and regulations promulgated
thereunder. The provisions of this section shall be implemented in a manner
otherwise than in strict conformity with the terms of this section to correct
this section (or any portion hereof) which may be defective or inconsistent with
the intended Maximum Percentage beneficial ownership limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such Maximum Percentage limitation. The limitations contained in this section
shall apply to a successor holder of this Master Note and shall be
unconditional, irrevocable and non-waivable. For any reason at any time, upon
the written or oral request of Lender, Borrower shall within one (1) business
day confirm orally and in writing to Lender the number of shares of Common Stock
then outstanding, including by virtue of any prior conversion or exercise of
convertible or exercisable securities into Common Stock, including, without
limitation, pursuant to this Master Note. By written notice to Borrower, Lender
may increase, decrease or waive the Maximum Percentage as to itself but any such
waiver will not be effective until the 61st day after delivery thereof. The
foregoing 61-day notice requirement is enforceable, unconditional and
non-waivable and shall apply to all affiliates and assigns of Lender.

 

12.              Survival. This Master Note shall survive until the later of (i)
the Option Expiration Date, and (ii) the date the last funded Subsequent Note
has been repaid or converted in full.

 

13.              Rights and Remedies Cumulative. All rights, remedies, and
powers conferred in this Master Note are cumulative and not exclusive of any
other rights or remedies, and shall be in addition to every other right, power,
and remedy that Lender may have, whether specifically granted in this Master
Note, or existing at law, in equity, or by statute, and any and all such rights
and remedies may be exercised from time to time and as often and in such order
as Lender may deem expedient. The parties acknowledge and agree that upon
Borrower’s failure to comply with the provisions of this Master Note, Lender’s
damages would be uncertain and difficult (if not impossible) to accurately
estimate because of the parties’ inability to predict future interest rates and
future share prices, Lender’s increased risk, and the uncertainty of the
availability of a suitable substitute investment opportunity for Lender, among
other reasons. Accordingly, any fees, charges, and default interest due under
this Master Note are intended by the parties to be, and shall be deemed,
liquidated damages (under Borrower’s and Lender’s expectations that any such
liquidated damages will tack back to the Effective Date for purposes of
determining the holding period under Rule 144). The parties agree that such
liquidated damages are a reasonable estimate of Lender’s actual damages and not
a penalty, and shall not be deemed in any way to limit any other right or remedy
Lender may have hereunder, at law or in equity. The parties acknowledge and
agree that under the circumstances existing at the time this Master Note is
entered into, such liquidated damages are fair and reasonable and are not
penalties. All fees, charges, and default interest provided for in this Master
Note are agreed to by the parties to be based upon the obligations and the risks
assumed by the parties as of the Effective Date and are consistent with
investments of this type. The liquidated damages provisions of this Master Note
shall not limit or preclude a party from pursuing any other remedy available at
law or in equity; provided, however, that the liquidated damages provided for in
this Master Note are intended to be in lieu of actual damages.

 

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14.              Governing Law. This Master Note shall be governed by and
interpreted in accordance with the laws of the State of Utah for contracts to be
wholly performed in such state and without giving effect to the principles
thereof regarding the conflict of laws. Unless the context otherwise requires,
all terms of this Master Note and Exhibit C shall also apply to each Subsequent
Note. Each party consents to and expressly agrees that venue for Arbitration (as
defined in Exhibit C) of any dispute arising out of or relating to this Master
Note or the relationship of the parties or their affiliates shall be in Salt
Lake County or Utah County, Utah. Without modifying the parties obligations to
resolve disputes hereunder pursuant to the Arbitration Provisions (as defined
below), for any litigation arising in connection with this Master Note, each
party (a) consents to and expressly submits to the exclusive personal
jurisdiction of any state or federal court sitting in Salt Lake County, Utah,
(b) expressly submits to the venue of any such court for the purposes hereof,
and (c) waives any claim of improper venue and any claim or objection that such
courts are an inconvenient forum or any other claim or objection to the bringing
of any such proceeding in such jurisdictions or to any claim that such venue of
the suit, action or proceeding is improper.

 

15.              Arbitration. The parties shall submit all Claims (as defined in
Exhibit C) arising under this Master Note or other agreements between the
parties and their affiliates to binding arbitration pursuant to the arbitration
provisions set forth in Exhibit C attached hereto (the “Arbitration
Provisions”). The parties hereby acknowledge and agree that the Arbitration
Provisions are unconditionally binding on the parties hereto and are severable
from all other provisions of this Master Note. Any capitalized term not defined
in the Arbitration Provisions shall have the meaning set forth in this Master
Note. By executing this Master Note, Borrower represents, warrants and covenants
that Borrower has reviewed the Arbitration Provisions carefully, consulted with
legal counsel about such provisions (or waived its right to do so), understands
that the Arbitration Provisions are intended to allow for the expeditious and
efficient resolution of any dispute hereunder, agrees to the terms and
limitations set forth in the Arbitration Provisions, and that Borrower will not
take a position contrary to the foregoing representations. Borrower acknowledges
and agrees that Lender may rely upon the foregoing representations and covenants
of Borrower regarding the Arbitration Provisions.

 

16.              Delivery of Process by Lender to Borrower. In the event of any
action or proceeding by Lender against Borrower, and only by Lender against
Borrower, service of copies of summons and/or complaint and/or any other process
which may be served in any such action or proceeding may be made by Lender via
U.S. Mail, overnight delivery services such as FedEx or UPS, fax, or process
server, or by mailing or otherwise delivering a copy of such process to Borrower
at its last known attorney as set forth in its most recent SEC filing.

 

17.              Attorneys' Fees and Cost of Collection. In the event of any
arbitration or action at law or in equity to enforce or interpret the terms of
this Master Note, the parties agree that the party who is awarded the most money
shall be deemed the prevailing party for all purposes and shall therefore be
entitled to an additional award of the full amount of the attorneys’ fees,
deposition costs, and expenses paid by such prevailing party in connection with
arbitration or litigation without reduction or apportionment based upon the
individual claims or defenses giving rise to the fees and expenses. Nothing
herein shall restrict or impair an arbitrator’s or a court’s power to award fees
and expenses for frivolous or bad faith pleading. If (a) this Master Note is
placed in the hands of an attorney for collection or enforcement prior to
commencing arbitration or legal proceedings, or is collected or enforced through
any arbitration or legal proceeding, or Lender otherwise takes action to collect
amounts due under this Master Note or to enforce the provisions of this Master
Note; or (b) there occurs any bankruptcy, reorganization, receivership of
Borrower or other proceedings affecting Borrower’s creditors’ rights and
involving a claim under this Master Note; then Borrower shall pay the costs
incurred by Lender for such collection, enforcement or action or in connection
with such bankruptcy, reorganization, receivership or other proceeding,
including, without limitation, attorneys’ fees, deposition costs, and
disbursements.

 

18.              Notices. Any notice required or permitted hereunder (including
Conversion Notices) must be in writing and either personally served, sent by
facsimile or email, or sent by overnight courier. Notices will be deemed
effectively delivered at the time of transmission if by facsimile or email, and
if by overnight courier the business day after such notice is deposited with the
courier service for delivery. A notice may be sent to a party’s last known
address, including the last known address of Borrower set forth in its most
recent SEC filing.

 

19.              Opinion of Counsel. In the event that an opinion of counsel is
needed for any matter related to any Note, Lender has the right to have any such
opinion provided by its counsel. Lender also has the right to have any such
opinion provided by Borrower’s counsel.

 

20.              Time of the Essence. Time is expressly made of the essence with
respect to each and every provision of this Master Note. If the last day of any
time period stated herein shall fall on a Saturday, Sunday or non-Trading Day,
then such time period shall be extended to the next succeeding day Trading Day.

 

21.              Liquidated Damages. Lender and Borrower agree that in the event
Borrower fails to comply with any of the terms or provisions of any Note,
Lender’s damages would be uncertain and difficult (if not impossible) to
accurately estimate because of the parties’ inability to predict future interest
rates, future share prices, future trading volumes and other relevant factors.
Accordingly, Lender and Borrower agree that any fees, balance adjustments,
Default Interest, or other charges assessed under any Note are not penalties but
instead are intended by the parties to be, and shall be deemed, liquidated
damages (under Lender’s and Borrower’s expectations that any such liquidated
damages will tack back to the applicable Purchase Price Date for purposes of
determining the holding period under Rule 144).

 

5

 

 

22.              Definitions.

 

22.1.        “Closing Bid Price” and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on its principal market, as reported by
Bloomberg, or, if its principal market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if its principal market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in “OTC Pink” by Pink OTC
Markets Inc. (formerly Pink Sheets LLC), and any successor thereto. If the
Closing Bid Price or the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by Lender and Borrower. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during such period.

 

22.2.        “Conversion Share Value” means the product of the number of
Conversion Shares deliverable pursuant to any Conversion multiplied by the
Closing Sale Price of the Common Stock on the Delivery Date for such Conversion.

 

22.3.        “Default Effect” means a calculation obtained by multiplying the
Outstanding Balance as of the date the applicable Event of Default occurred by
(i) 15% for each occurrence of any Major Default, or (ii) 5% for each occurrence
of any Minor Default, and then adding the resulting product to the Outstanding
Balance as of the date the applicable Event of Default occurred, with the sum of
the foregoing then becoming the Outstanding Balance under this Note as of the
date the applicable Event of Default occurred; provided that the Default Effect
may only be applied three (3) times hereunder with respect to Major Defaults and
three (3) times hereunder with respect to Minor Defaults; and provided further
that the application of the Default Effect shall not result in a cumulative
increase of the Outstanding Balance in an amount greater than 156.25%.

 

22.4.        “DTC” means the Depository Trust Company.

 

22.5.        “DTC Eligible” means, with respect to the Common Stock, that such
Common Stock is eligible to be deposited in certificate form at the DTC, cleared
and converted into electronic shares by the DTC and held in the name of the
clearing firm servicing Lender’s brokerage firm for the benefit of Lender.

 

22.6.        “DTC/FAST Program” means the DTC’s Fast Automated Securities
Transfer Program.

 

22.7.        “DWAC” means Deposit Withdrawal at Custodian as defined by the DTC.

 

22.8.        “DWAC Eligible” means that (i) the Common Stock is eligible at the
DTC for full services pursuant to DTC’s operational arrangements, including
without limitation transfer through DTC’s DWAC system, (ii) Borrower has been
approved (without revocation) by the DTC’s underwriting department, (iii)
Borrower’s transfer agent is approved as an agent in the DTC/FAST Program, (iv)
the Conversion Shares are otherwise eligible for delivery via DWAC; (v)
Borrower’s transfer agent does not have a policy prohibiting or limiting
delivery of the Conversion Shares via DWAC; and (vi) Borrower has previously
delivered all Conversion Shares to Lender under the Note via DWAC.

 

22.9.        “Major Default” means any Event of Default occurring under Sections
7.1(i), (ii), (ix), or (xii) of this Note.

 

22.10.    “Mandatory Default Amount” means 125% of the amount of the Outstanding
Balance of the applicable Note immediately prior to any acceleration pursuant to
Section 8.

 

22.11.    “Minor Default” means any Event of Default that is not a Major
Default.

 

22.12.    “Trading Day” means any day on which the Common Stock is traded or
tradable for any period on the principal securities exchange or other securities
market on which the Common Stock is then being traded.

 

22.13.    “VWAP” means volume weighted average price.

 

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

 

6

 

 

IN WITNESS WHEREOF, Borrower has caused this Master Note to be duly executed as
of the Effective Date set out above.

 

BORROWER:

 

Rich Pharmaceuticals, Inc.

 

/s/ Ben Chang

By:

Name: Ben Chang

Title: CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Typenex Co-Investment, LLC

 

By: Red Cliffs Investments, Inc., its Manager

 

By: /s/ John M. Fife

John M. Fife, President

 

 

7

 

 

EXHIBIT A

 

SUBSEQUENT PROMISSORY NOTES #1 – #2

 

(See Attached)

 

8

 

 

SUBSEQUENT PROMISSORY NOTE #1

 

Purchase Price Date: ______, 201_ U.S. $60,500.00

  

FOR VALUE RECEIVED, Rich Pharmaceuticals, Inc., a Nevada corporation
(“Borrower”), promises to pay Typenex Co-Investment, LLC, a Utah limited
liability company, or its successors or assigns (“Lender”), $60,500.00 and any
other interest and fees according to the terms herein. This Subsequent
Promissory Note (this “Subsequent Note”) is made effective as of the Purchase
Price Date set forth above. All capitalized terms not defined herein shall have
the meanings ascribed to such terms in that certain Master Promissory Note
issued by Borrower in favor of Lender on September 18, 2014 (the “Master Note”).

 

1. The Purchase Price for this Subsequent Promissory Note is $55,000.00. The
initial Outstanding Balance of this Subsequent Note is $60,500.00, which
includes the $55,000.00 Purchase Price and a $5,500.00 OID. Borrower
acknowledges that the full and complete Purchase Price was received on the
Purchase Price Date. Proof of payment of the Purchase Price is attached hereto
as Schedule 1.

 

2. This Subsequent Note shall be considered a separate instrument from the
Master Note and from each other Subsequent Note.

 

3. Borrower acknowledges that this Subsequent Note is an unconditional, valid,
binding and enforceable obligation of Borrower not subject to offset, deduction
or counterclaim of any kind. Borrower and Lender agree that the Rule 144 holding
period of this Subsequent Note will begin on the Purchase Price Date.

 

4. This Subsequent Note shall be subject to and governed in accordance with the
terms and conditions set forth in the Master Note. All the terms and provisions
of the Master Note are hereby incorporated by reference and made a part of this
Subsequent Note. In the case of any conflict between the Master Note and this
Subsequent Note, the terms of the Master Note shall govern except with respect
to any terms expressly supplied by this Subsequent Note.

 

[Remainder of page intentionally left blank; signature page follows]

 

9

 

  

IN WITNESS WHEREOF, Borrower has caused this Subsequent Note #1 to be duly
executed as of the Effective Date of the Master Note.

 

BORROWER:

 

Rich Pharmaceuticals, Inc.

 

By: /s/ Ben Chang

Name: Ben Chang

Title: CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Typenex Co-Investment, LLC

 

By: Red Cliffs Investments, Inc., its Manager

 

 

By: /s/ John M . Fife

John M. Fife, President

 

10

 

  

SUBSEQUENT PROMISSORY NOTE #2

 

Purchase Price Date: ______, 201_ U.S. $60,500.00

 

FOR VALUE RECEIVED, Rich Pharmaceuticals, Inc., a Nevada corporation
(“Borrower”), promises to pay Typenex Co-Investment, LLC, a Utah limited
liability company, or its successors or assigns (“Lender”), $60,500.00 and any
other interest and fees according to the terms herein. This Subsequent
Promissory Note (this “Subsequent Note”) is made effective as of the Purchase
Price Date set forth above. All capitalized terms not defined herein shall have
the meanings ascribed to such terms in that certain Master Promissory Note
issued by Borrower in favor of Lender on September 18, 2014 (the “Master Note”).

 

1. The Purchase Price for this Subsequent Promissory Note is $55,000.00. The
initial Outstanding Balance of this Subsequent Note is $60,500.00, which
includes the $55,000.00 Purchase Price and a $5,500.00 OID. Borrower
acknowledges that the full and complete Purchase Price was received on the
Purchase Price Date. Proof of payment of the Purchase Price is attached hereto
as Schedule 1.

 

2. This Subsequent Note shall be considered a separate instrument from the
Master Note and from each other Subsequent Note.

 

3. Borrower acknowledges that this Subsequent Note is an unconditional, valid,
binding and enforceable obligation of Borrower not subject to offset, deduction
or counterclaim of any kind. Borrower and Lender agree that the Rule 144 holding
period of this Subsequent Note will begin on the Purchase Price Date.

 

4. This Subsequent Note shall be subject to and governed in accordance with the
terms and conditions set forth in the Master Note. All the terms and provisions
of the Master Note are hereby incorporated by reference and made a part of this
Subsequent Note. In the case of any conflict between the Master Note and this
Subsequent Note, the terms of the Master Note shall govern except with respect
to any terms expressly supplied by this Subsequent Note.

 

[Remainder of page intentionally left blank; signature page follows]

 

11

 

 

IN WITNESS WHEREOF, Borrower has caused this Subsequent Note #2 to be duly
executed as of the Effective Date of the Master Note.

 

BORROWER:

 

Rich Pharmaceuticals, Inc.

 

By: /s/ Ben Chang

Name: Ben Chang

Title: CEO

 

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Typenex Co-Investment, LLC

 

By: Red Cliffs Investments, Inc., its Manager

 

 

By: /s/ John M. Fife

John M. Fife, President

  

12

 

 

Exhibit B

CONVERSION NOTICE

Typenex Co-Investment, LLC
303 EAST WACKER DRIVE, SUITE 1200
CHICAGO, ILLINOIS 60601

Date:

Rich Pharmaceuticals, Inc.

9595 Wilshire Blvd, Suite 900

Beverly Hills, California 90212

Attn: Ben Chang

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to Rich Pharmaceuticals, Inc. , a
Nevada corporation (the “Company”), pursuant to that certain Master Convertible
Promissory Note made by the Company in favor of the Lender on September 18, 2014
or a Subsequent Note thereunder, as applicable (the “Note”), that the Lender
elects to convert the portion of the Outstanding Balance of the Note set forth
below into fully paid and non-assessable shares of Common Stock of the Company
as of the date of conversion specified below. Such conversion shall be based on
the Conversion Price set forth below. In the event of a conflict between this
Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of the Lender in its sole discretion, the Lender may provide a
new form of Conversion Notice to conform to the Note.

 

A.Date of conversion: ____________

B.Master Note or Subsequent Note #:________________

C.Conversion #: ____________

D.Conversion Amount: ____________

E.Average trade price: ____ (average of the three (3) lowest Closing Bid Prices
in the twenty (20) trading days as per Exhibit A)

F.Conversion Factor: ______ (60%, as may be adjusted per the Note)

G.Conversion Price: ______ (E multiplied by F)

H.Conversion Shares: _______________ (D divided by G)

I.Remaining Outstanding Balance of Note: ____________*

* Subject to adjustments for corrections, defaults, and other adjustments
permitted by the Master Note the terms of which shall control in the event of
any dispute between the terms of this Conversion Notice and such Master Note.

 

Please transfer the Conversion Shares electronically (via DWAC) to the following
account:

Broker:

Address:

DTC#:

Account #:

Account Name:

 

To the extent the Conversion Shares are not able to be delivered to the Lender
electronically via the DWAC system, please deliver all such certificated shares
to Lender via reputable overnight courier after receipt of this Conversion
Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

Typenex Co-Investment, LLC

 

By: Red Cliffs Investments, Inc., its Manager

 

 

By: /s/ John M. Fife

John M. Fife, President

 

13

 

 

EXHIBIT C

 

ARBITRATION PROVISIONS

 

1.       Dispute Resolution. For purposes of this Exhibit C, the term “Claims”
means any disputes, claims, demands, causes of action, liabilities, damages,
losses, or controversies whatsoever arising from related to or connected with
the transactions contemplated in the Master Note and any communications between
the parties related thereto, including without limitation any claims of mutual
mistake, mistake, fraud, misrepresentation, failure of formation, failure of
consideration, promissory estoppel, unconscionability, failure of condition
precedent, rescission, and any statutory claims, tort claims, contract claims,
or claims to void, invalidate or terminate the Master Note. The parties hereby
agree that the arbitration provisions set forth in this Exhibit C (“Arbitration
Provisions”) are binding on the parties hereto and are severable from all other
provisions in the Master Note. As a result, any attempt to rescind the Master
Note or declare the Master Note invalid or unenforceable for any reason is
subject to these Arbitration Provisions. These Arbitration Provisions shall also
survive any termination or expiration of the Master Note.

 

2.       Arbitration. Except as otherwise provided herein, all Claims must be
submitted to arbitration (“Arbitration”) to be conducted in Salt Lake County,
Utah or Utah County, Utah and pursuant to the terms set forth in these
Arbitration Provisions. The parties agree that the award of the arbitrator shall
be final and binding upon the parties; shall be the sole and exclusive remedy
between them regarding any Claims, counterclaims, issues, or accountings
presented or pleaded to the arbitrator; and shall promptly be payable in United
States dollars free of any tax, deduction or offset (with respect to monetary
awards). Any costs or fees, including without limitation attorneys’ fees,
incident to enforcing the arbitrator’s award shall, to the maximum extent
permitted by law, be charged against the party resisting such enforcement. The
award shall include Default Interest (as defined in the Master Note) both before
and after the award. Judgment upon the award of the arbitrator will be entered
and enforced by a state court sitting in Salt Lake County, Utah. The parties
hereby incorporate herein the provisions and procedures set forth in the Utah
Uniform Arbitration Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded
from time to time, the “Arbitration Act”). Pursuant to Section 78B-11-105 of the
Arbitration Act, in the event of conflict between the terms of these Arbitration
Provisions and the provisions of the Arbitration Act, the terms of these
Arbitration Provisions shall control.

 

3.       Arbitration Proceedings. Arbitration between the parties will be
subject to the following procedures:

 

3.1.        Pursuant to Section 110 of the Arbitration Act, the parties agree
that a party may initiate Arbitration by giving written notice to the other
party (“Arbitration Notice”) in the same manner that notice is permitted under
Section 18 of the Master Note; provided, however, that the Arbitration Notice
may not be given by email or fax. Arbitration will be deemed initiated as of the
date that the Arbitration Notice is deemed delivered under Section 18 of the
Master Note (the “Service Date”). After the Service Date, information may be
delivered, and notices may be given, by email or fax pursuant to Section 18 of
the Master Note. The Arbitration Notice must describe the nature of the
controversy, the remedies sought, and the election to commence Arbitration
proceedings. All Claims in the Arbitration Notice must be pleaded consistent
with the Utah Rules of Civil Procedure.

 

3.2.        Within ten (10) calendar days after the Service Date, Lender shall
select and submit to Borrower the names of three arbitrators that are designated
as “neutrals” or qualified arbitrators by Utah ADR Services
(http://www.utahadrservices.com) (such three designated persons hereunder are
referred to herein as the “Proposed Arbitrators”). For the avoidance of doubt,
each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR
Services. Within ten (10) calendar days after Lender has submitted to Borrower
the names of the Proposed Arbitrators, Borrower must select, by written notice
to Lender, one (1) of the Proposed Arbitrators to act as the arbitrator for the
parties under these Arbitration Provisions. If Borrower fails to select one of
the Proposed Arbitrators in writing within such 10-day period, then Lender may
select the arbitrator from the Proposed Arbitrators by providing written notice
of such selection to Borrower. If Lender fails to identify the Proposed
Arbitrators within the time period required above, then Borrower may at any time
prior to Lender designating the Proposed Arbitrators, select the names of three
arbitrators that are designated as “neutrals” or qualified arbitrators by Utah
ADR Service by written notice to Lender. Lender may then, within ten (10)
calendar days after Borrower has submitted notice of its selected arbitrators to
Lender, select, by written notice to Borrower, one (1) of the selected
arbitrators to act as the arbitrator for the parties under these Arbitration
Provisions. If Lender fails to select in writing and within such 10-day period
one of the three arbitrators selected by Borrower, then Borrower may select the
arbitrator from its three previously selected arbitrators by providing written
notice of such selection to Lender. Subject to subparagraph 3.12 below, the cost
of the arbitrator must be paid equally by both parties; provided, however, that
if one party refuses or fails to pay its portion of the arbitrator fee, then the
other party can advance such unpaid amount (subject to the accrual of Default
Interest thereupon), with such amount added to or subtracted from, as
applicable, the award granted by the arbitrator. If Utah ADR Services ceases to
exist or to provide a list of neutrals, then the arbitrator shall be selected
from the names of three arbitrators that are designated as “neutrals” or
qualified arbitrators by the American Arbitration Association. The date that the
selected arbitrator agrees in writing to serve as the arbitrator hereunder is
referred to herein as the “Arbitration Commencement Date”.

 

3.3.        An answer and any counterclaims to the Arbitration Notice, which
must be pleaded consistent with the Utah Rules of Civil Procedure, shall be
required to be delivered to the other party within twenty (20) calendar days
after the Service Date. Upon request, the arbitrator is hereby instructed to
render a default award, consistent with the relief requested in the Arbitration
Notice, against a party that fails to submit an answer within such time period.

 

3.4.        The party that delivers the Arbitration Notice to the other party
shall have the option to also commence legal proceedings with any state court
sitting in Salt Lake County, Utah (“Litigation Proceedings”), subject to the
following: (i) the complaint in the Litigation Proceedings is to be
substantially similar to the claims set forth in the Arbitration Notice,
provided that an additional cause of action to compel arbitration will also be
included therein, (ii) so long as the other party files an answer to the
complaint in the Litigation Proceedings and an answer to the Arbitration Notice,
the Litigation Proceedings will be stayed pending an award of the arbitrator
hereunder, (iii) if the other party fails to file an answer in the Litigation
Proceedings or an answer in the Arbitration Proceedings, then the party
initiating Arbitration shall be entitled to a default judgment consistent with
the relief requested, to be entered in the Litigation Proceedings, and (iv) any
legal or procedural issue arising under the Arbitration Act that requires a
decision of a court of competent jurisdiction may be determined in the
Litigation Proceedings. Any award of the arbitrator may be entered in such
Litigation Proceedings pursuant to the Arbitration Act.

 

14

 

 

3.5.        Pursuant to Section 118(8) of the Arbitration Act, the parties agree
that discovery shall be conducted in accordance with the Utah Rules of Civil
Procedure; provided, however, that incorporation of such rules will in no event
supersede the Arbitration Provisions set forth herein, including without
limitation the time limitation set forth in Paragraph 3.9 below, and the
following:

 

(a)                Discovery will only be allowed if the likely benefits of the
proposed discovery outweigh the burden or expense, and the discovery sought is
likely to reveal information that will satisfy a specific element of a claim or
defense already pleaded in the Arbitration. The party seeking discovery shall
always have the burden of showing that all of the standards and limitations set
forth in these Arbitration Provisions are satisfied. The scope of discovery in
the Arbitration proceedings shall also be limited as follows:

 

(i)           To facts directly connected with the transactions contemplated by
the Master Note.

 

(ii)         To facts and information that cannot be obtained from another
source that is more convenient, less burdensome or less expensive.

 

(b)                No party shall be allowed (a) more than fifteen (15)
interrogatories (including discrete subparts), (b) more than fifteen (15)
requests for admission (including discrete subparts), (c) more than ten (10)
document requests (including discrete subparts), or (d) more than three
depositions (excluding expert depositions) for a maximum of seven (7) hours per
deposition.

 

3.6.        Any party submitting any written discovery requests, including
interrogatories, requests for production, subpoenas to a party or a third party,
or requests for admissions, must prepay the estimated attorneys’ fees and costs,
as determined by the arbitrator, before the responding party has any obligation
to produce or respond.

 

(a)                All discovery requests must be submitted in writing to the
arbitrator and the other party before issuing or serving such discovery
requests. The party issuing the written discovery requests must include with
such discovery requests a detailed explanation of how the proposed discovery
requests satisfy the requirements of these Arbitration Provisions and the Utah
Rules of Civil Procedure. Any party will then be allowed, within ten (10)
calendar days of receiving the proposed discovery requests, to submit to the
arbitrator an estimate of the attorneys’ fees and costs associated with
responding to such written discovery requests and a written challenge to each
applicable discovery request. After receipt of an estimate of attorneys’ fees
and costs and/or challenge(s) to one or more discovery requests, the arbitrator
will make a finding as to the likely attorneys’ fees and costs associated with
responding to the discovery requests and issue an order that (A) requires the
requesting party to prepay the attorneys’ fees and costs associated with
responding to the discovery requests, and (B) requires the responding party to
respond to the discovery requests as limited by the arbitrator within a certain
period of time after receiving payment from the requesting party. If a party
entitled to submit an estimate of attorneys’ fees and costs and/or a challenge
to discovery requests fails to do so within such 10-day period, the arbitrator
will make a finding that (A) there are no attorneys’ fees or costs associated
with responding to such discovery requests, and (B) the responding party must
respond to such discovery requests (as may be limited by the arbitrator) within
a certain period of time as determined by the arbitrator.

 

(b)                In order to allow a written discovery request, the arbitrator
must find that the discovery request satisfies the standards set forth in these
Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator
must strictly enforce these standards. If a discovery request does not satisfy
any of the standards set forth in these Arbitration Provisions or the Utah Rules
of Civil Procedure, the arbitrator may modify such discovery request to satisfy
the applicable standards, or strike such discovery request in whole or in part.

 

(c)                Discovery deadlines will be set forth in a scheduling order
issued by the arbitrator. The parties hereby authorize and direct the arbitrator
to take such actions and make such rulings as may be necessary to carry out the
parties’ intent for the arbitration proceedings to be efficient and expeditious.

 

15

 

 

3.7.        Each party may submit expert reports (and rebuttals thereto),
provided that such reports must be submitted by the deadlines established by the
arbitrator. Expert reports must contain the following: (a) a complete statement
of all opinions the expert will offer at trial and the basis and reasons for
them; (b) the expert’s name and qualifications, including a list of all
publications within the preceding 10 years, and a list of any other cases in
which the expert has testified at trial or in a deposition or prepared a report
within the preceding 10 years; and (c) the compensation to be paid for the
expert’s study and testimony. The parties are entitled to depose any other
party’s expert witness one time for no more than 4 hours. An expert may not
testify in a party’s case-in-chief concerning any matter not fairly disclosed in
the expert report.

 

3.8.        All information disclosed by either party during the Arbitration
process (including without limitation information disclosed during the discovery
process) shall be considered confidential in nature. Each party agrees not to
disclose any confidential information received from the other party during the
discovery process unless (i) prior to or after the time of disclosure such
information becomes public knowledge or part of the public domain, not as a
result of any inaction or action of the receiving party, (ii) such information
is required by a court order, subpoena or similar legal duress to be disclosed
if such receiving party has notified the other party thereof in writing and
given it a reasonable opportunity to obtain a protective order from a court of
competent jurisdiction prior to disclosure; or (iii) disclosed to the receiving
party’s agents, representatives and legal counsel on a need to know basis who
each agree in writing not to disclose such information to any third party.
Pursuant to Section 118(5) of the Arbitration Act, the arbitrator is hereby
authorized and directed to issue a protective order to prevent the disclosure of
privileged information and confidential information upon the written request of
either party.

 

3.9.        The parties hereby authorize and direct the arbitrator to take such
actions and make such rulings as may be necessary to carry out the parties’
intent for the arbitration proceedings to be efficient and expeditious. Pursuant
to Section 120 of the Arbitration Act, the parties hereby agree that an award of
the arbitrator must be made within 150 days after the Arbitration Commencement
Date. The arbitrator is hereby authorized and directed to hold a scheduling
conference within ten (10) calendar days after the Arbitration Commencement Date
in order to establish a scheduling order with various binding deadlines for
discovery, expert testimony, and the submission of documents by the parties to
enable the arbitrator to render a decision prior to the end of such 150-day
period. The Utah Rules of Evidence will apply to any final hearing before the
arbitrator.

 

3.10.     The arbitrator shall have the right to award or include in the
arbitrator’s award any relief which the arbitrator deems proper under the
circumstances, including, without limitation, specific performance and
injunctive relief, provided that the arbitrator may not award exemplary or
punitive damages.

 

3.11.     If any part of these Arbitration Provisions is found to violate
applicable law or to be illegal, then such provision shall be modified to the
minimum extent necessary to make such provision enforceable under applicable
law.

 

3.12.     The arbitrator is hereby directed to require the losing party to (i)
pay the full amount of the costs and fees of the arbitrator, and (ii) reimburse
the prevailing party the reasonable attorneys’ fees, arbitrator costs,
deposition costs, and other discovery costs incurred by the prevailing party.

 

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