NEITHER
THE ISSUANCE
AND
SALE
OF
THE SECURITIES
REPRESENTED BY THIS
CERTIFICATE NOR
THE SECURITIES
INTO WHICH
THESE SECURITIES
ARE CONVERTIBLE
HAVE BEEN
REGISTERED UNDER
THE SECURITIES
ACT OF
1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES
MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED,
OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL
SHALL BE SELECTED
BY THE HOLDER),
IN A GENERALLY
ACCEPTABLE FORM,
THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT
TO RULE
144 OR RULE
144A UNDER
SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION
WITH A BONA
FIDE MARGIN
ACCOUNT OR
OTHER LOAN
OR FINANCING
ARRANGEMENT SECURED BY
THE SECURITIES.


 


 


Principal
Amount: $37,500.00Issue
Date: March 11, 2014 Purchase
Price: $37,500.00


 


 


CONVERTIBLE
PROMISSORY NOTE


 


FORVALUE
 RECEIVED,
 RICHPHARMACEUTICALS,
 INC.,
 aNevada


corporation
(hereinafter called
the “Borrower”),
hereby promises
to pay
to the order
of ASHER
ENTERPRISES, INC.,
a Delaware
corporation, or
registered assigns
(the “Holder”)
the sum of


$37,500.00
together with
any interest
as set
forth herein,
on December
13, 2014 (the
“Maturity Date”),
and to
pay interest
on the unpaid
principal balance
hereof at
the rate of
eight percent
(8%) (the
“Interest Rate”)
per annum from
the date hereof
(the “Issue Date”)
until the same
becomes due and payable, whether
at maturity or upon acceleration or
by prepayment or otherwise.
This Note
may not be
prepaid in
whole or in
part except
as otherwise
explicitly set forth herein.
Any amount
of principal or interest
on this Note which is not paid
when due shall bear
interest at the rate
of twenty two percent
(22%) per annum
from the due date thereof
until the same is paid (“Default
Interest”). Interest shall commence
accruing on the date that the
Note is fully paid and
shall be computed on the basis
of a 365-day year and the actual number
of days elapsed. All
payments due hereunder (to the extent not converted
into common stock, $0.10 par value
per share (the
“Common Stock”)
in accordance with
the terms hereof)
shall be made in lawful
money of the
United States
of America.
All payments
shall be made
at such
address as
the Holder shall hereafter give
to the Borrower by
written notice made in accordance
with the provisions of this Note.
Whenever any amount
expressed to be due by the terms
of this Note is due on any
day which is not a business
day, the same shall
instead be due on the next succeeding
day which is a business day and,
in the case
of any interest payment
date which is not the date
on which this Note is
paid in full,
the extension of the due date
thereof shall not be taken
into account for purposes of determining
the amount of interest due on
such date.
As used in this Note, the term
“business day”
shall mean any
day other than
a Saturday, Sunday or
a day on which
commercial banks
in the city of New York, New
York are authorized or required
by law or executive order to
remain closed. Each
capitalized term used herein,
and not otherwise




    	1



    	 



    

defined,
shall have
the meaning
ascribed thereto
in that
certain Securities
Purchase Agreement
dated the
date hereof,
pursuant to
which this
Note was
originally issued (the
“Purchase Agreement”).


 


This
Note is
free from
all taxes, liens,
claims and
encumbrances with
respect to the
issue thereof
and shall
not be subject
to preemptive
rights or other
similar rights
of shareholders
of the Borrower
and will not impose personal
liability upon the holder thereof.


 


The
following terms
shall apply to this Note:


 


ARTICLE
I.
CONVERSION RIGHTS


 


1.1 
 Conversion Right.
The Holder
shall have
the right from
time to time,
and at
any time during
the period beginning
on the date
which is one
hundred eighty
(180) days
following the date
of this Note
and ending
on the later
of: (i)
the Maturity Date
and (ii)
the date of payment
of the Default Amount (as defined
in Article III) pursuant to Section
1.6(a) or Article III, each in
respect of the remaining
outstanding principal amount
of this Note to convert
all or any part of the outstanding and
unpaid principal amount of this
Note into fully paid
and non- assessable shares of
Common Stock, as such
Common Stock exists on
the Issue Date, or any shares
of capital
stock or
other securities
of the Borrower
into which
such Common
Stock shall
hereafter be changed or reclassified
at the conversion price (the
“Conversion Price”) determined
as provided herein (a
“Conversion”); provided, however,
that in no event shall the Holder
be entitled to convert any portion of
this Note in excess of that portion
of this Note upon conversion
of which the sum of (1) the number of shares
of Common Stock beneficially
owned by the Holder and
its affiliates (other than
shares of Common Stock which
may be deemed beneficially owned through
the ownership of the unconverted portion of the Notes
or the unexercised or unconverted
portion of any other
security of the Borrower subject
to a limitation on conversion
or exercise
analogous to the limitations
contained herein) and
(2) the number
of shares of Common Stock
issuable upon the conversion of the portion
of this Note with respect
to which the determination of this
proviso is being made, would
result in beneficial ownership
by the Holder and its affiliates
of more than 4.99% of the outstanding
shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined
in accordance with
Section 13(d) of the Securities
Exchange Act of 1934, as amended
(the “Exchange Act”),
and Regulations
13D-G thereunder, except
as otherwise provided
in clause (1) of such proviso,
provided, further, however, that
the limitations on conversion
may be waived by the Holder
upon, at the election
of the Holder, not
less than
61 days’ prior notice
to the Borrower, and the provisions
of the conversion limitation shall
continue to apply until such 61st day (or
such later date, as determined
by the Holder, as may be specified
in such notice of waiver).
The number of shares of Common Stock to be issued
upon each conversion
of this Note shall be determined
by dividing the Conversion Amount
(as defined below)
by the applicable Conversion
Price then
in effect
on the date specified
in the notice of conversion,
in the form attached
hereto as Exhibit A (the
“Notice of Conversion”),
delivered to the Borrower by the Holder in accordance
with Section 1.4 below; provided
that the Notice of Conversion
is submitted by facsimile or
e-mail (or by
other means resulting in, or
reasonably expected to result in, notice)
to the Borrower before 6:00 p.m.,
New York, New
York time on such conversion
date (the “Conversion Date”).
The term “Conversion Amount”
means, with respect
to any conversion
of this Note,
the sum of (1) the principal
amount of this Note
to be




    	2



    	 



    

converted
in such
conversion plus (2)
at the Holder’s
option, accrued
and unpaid
interest, if any,
on such
principal amount
at the
interest rates
provided in this
Note to
the Conversion
Date, plus


(3)
at the
Holder’s option,
Default Interest,
if any, on
the amounts
referred to
in the immediately
preceding clauses
(1) and/or
(2) plus
(4) at
the Holder’s
option, any amounts
owed to
the Holder
pursuant to Sections 1.3 and
1.4(g) hereof.


 


		1.2	Conversion
                                         Price.



 


(a)   
Calculation of
Conversion Price.
The conversion
price (the
“Conversion Price”)
shall equal
the Variable
Conversion Price
(as defined
herein) (subject
to equitable
adjustments for
stock splits,
stock dividends
or rights
offerings by
the  Borrower
relating to the Borrower’s
securities or the securities of any
subsidiary of the Borrower, combinations,
recapitalization, reclassifications,
extraordinary distributions and
similar events). The
"Variable Conversion
Price" shall mean
58% multiplied
by the Market
Price (as
defined herein)
(representing a discount rate
of 42%). “Market
Price” means
the average
of the lowest
three (3)
Trading Prices (as
defined below)
for the
Common Stock
during the ten
(10) Trading Day
period ending on the
latest complete
Trading Day prior to the
Conversion Date.
“Trading Price” means,
for any security as
of any
date, the closing
bid price on the
Over-the-Counter Bulletin Board,
or applicable trading market
(the “OTCBB”)
as reported by a
reliable reporting service
(“Reporting Service”)
designated by the Holder
(i.e. Bloomberg) or, if the
OTCBB is not
the principal trading market
for such security, the closing
bid price of such security on
the principal securities exchange
or trading market where
such security is listed or traded
or, if no closing
bid price of such
security is available in any
of the foregoing
manners, the average
of the closing bid prices
of any market
makers for such security that
are listed in the “pink
sheets” by the National Quotation
Bureau, Inc. If the Trading
Price cannot be calculated for
such security on such
date in
the manner provided
above, the Trading Price
shall be the
fair market
value as mutually determined
by the Borrower
and the holders of a
majority in interest of the Notes
being converted for which the
calculation of the Trading Price
is required in order to determine
the Conversion Price
of such Notes.
“Trading Day” shall
mean any
day on which
the Common Stock
is tradable for
any period
on the OTCBB, or on
the principal securities
exchange or other securities
market on which the
Common Stock is then being
traded.


 


(b)  
Conversion Price
During Major
Announcements. Notwithstanding
anything contained
in Section 1.2(a)
to the contrary,
in the event
the Borrower
(i) makes
a public announcement
that it intends
to consolidate
or merge
with any
other corporation
(other than
a merger in which the Borrower
is the surviving or continuing
corporation and its capital stock
is unchanged) or sell or transfer
all or substantially all of the
assets of the Borrower or (ii)
any person,
group or entity (including the Borrower)
publicly announces a tender offer
to purchase 50% or more of the Borrower’s
Common Stock (or any
other takeover scheme) (the
date of the announcement
referred to in clause
(i) or
(ii) is
hereinafter referred
to as the “Announcement
Date”), then the Conversion Price
shall, effective upon the Announcement
Date and continuing through
the Adjusted Conversion Price
Termination Date (as defined
below), be equal to the lower
of (x) the Conversion Price
which would have
been applicable for a Conversion
occurring on the Announcement
Date and
(y) the Conversion
Price that
would otherwise
be in effect.
From and after
the Adjusted Conversion
Price Termination
Date, the Conversion
Price shall be determined
as set
forth in this
Section 1.2(a).
For purposes hereof,
“Adjusted Conversion
Price Termination Date”
shall mean, with respect
to any proposed transaction or tender offer
(or




    	3



    	 



    

takeover
scheme) for
which a public
announcement as
contemplated by
this Section
1.2(b) has
been made,
the date
upon which
the Borrower
(in the case
of clause
(i) above)
or the person,
group or entity (in
the case
of clause
(ii) above)
consummates or
publicly announces the termination
or abandonment of the proposed
transaction or tender offer (or takeover
scheme) which caused this Section
1.2(b) to become operative.


 


1.3 
 Authorized Shares.
The Borrower
covenants that
during the period
the conversion
right exists,
the Borrower
will reserve
from its authorized
and unissued
Common Stock
a sufficient
number of
shares, free
from preemptive
rights, to
provide for
the issuance
of Common Stock upon the
full conversion of this Note
issued pursuant to the Purchase
Agreement. The Borrower
is required at
all times to have authorized
and reserved
five times the number of
shares that is actually issuable
upon full conversion of the Note
(based on the Conversion
Price of the Notes in effect
from time to time)(the “Reserved
Amount”). The Reserved Amount
shall be increased from time
to time in accordance with the Borrower’s
obligations hereunder. The
Borrower represents that
upon issuance, such shares will
be duly and
validly issued, fully
paid and non-assessable.
In addition, if the
Borrower shall issue
any securities or make
any change to its capital
structure which would change
the number of shares of Common
Stock into which the Notes
shall be convertible
at the then
current Conversion
Price, the
Borrower shall
at the same
time make
proper provision so
that thereafter
there shall be
a sufficient number
of shares
of Common Stock
authorized and reserved, free
from preemptive rights, for conversion
of the outstanding Notes. The
Borrower (i) acknowledges that
it has irrevocably instructed
its transfer agent
to issue certificates
for the Common
Stock issuable
upon conversion of
this Note,
and


(ii)  
agrees that
its issuance
of this Note
shall constitute
full authority
to its officers
and agents
who are
charged with
the duty of
executing stock certificates
to execute
and issue
the necessary certificates
for shares
of Common Stock
in accordance with
the terms
and conditions
of this Note.


 


If,
at any
time the
Borrower does not
maintain the Reserved
Amount it will
be considered
an Event of Default under
Section 3.2 of the Note.


 


		1.4	Method
                                         of
                                         Conversion.



 


(a)   
Mechanics of
Conversion. Subject
to Section
1.1, this
Note may
be converted
by the Holder
in whole
or in part
at any time
from time
to time after
the Issue
Date, by


(A) 
submitting to
the Borrower
a Notice
of Conversion
(by facsimile,
e-mail or
other reasonable
means of communication
dispatched on the
Conversion Date
prior to
6:00 p.m., New
York, New
York time)
and (B) subject
to Section
1.4(b), surrendering
this Note
at the
principal office
of the Borrower.


 


(b)  
Surrender of
Note
Upon
Conversion.
Notwithstanding anything
to the contrary
set forth
herein, upon conversion
of this Note
in accordance
with the
terms hereof,
the Holder shall
not be required
to physically surrender this
Note to the Borrower
unless the entire unpaid
principal amount of this Note
is so converted. The Holder and the
Borrower shall maintain
records showing the principal amount
so converted and the
dates of such conversions
or shall use such
other method,
reasonably satisfactory to the Holder
and the Borrower,
so as not to require
physical surrender of this Note
upon each such conversion.
In the event of any dispute
or discrepancy, such
records of the Borrower
shall, prima
facie, be
controlling and
determinative in




    	4



    	 



    

the
absence of
manifest error.
Notwithstanding the foregoing,
if any
portion of this
Note is
converted as
aforesaid, the Holder
may not
transfer this
Note unless
the Holder
first physically
surrenders this
Note to
the Borrower,
whereupon the Borrower
will forthwith issue
and deliver
upon the order
of the Holder
a new
Note of
like tenor, registered
as the Holder
(upon payment by
the Holder of any
applicable transfer taxes) may request,
representing in the aggregate the remaining
unpaid principal amount of this
Note. The
Holder and any assignee,
by acceptance of this Note, acknowledge
and agree that, by reason of
the provisions of this paragraph, following
conversion of a
portion of this Note,
the unpaid and unconverted
principal amount of this Note
represented by this Note may be
less than the
amount stated on the face hereof.


 


(c)   
Payment of
Taxes.
The Borrower
shall not
be required
to pay
any tax
which may
be payable
in respect
of any
transfer involved
in the issue
and delivery of
shares of
Common Stock or other
securities or property on conversion
of this Note in a name
other than that
of the Holder (or
in street name),
and the Borrower
shall not be required
to issue or deliver any
such shares
or other
securities or property
unless and
until the person
or persons
(other than the Holder
or the custodian in whose street
name such shares are to be held
for the Holder’s account)
requesting the
issuance thereof
shall have
paid to the
Borrower the
amount of
any such tax or shall have
established to the satisfaction of the
Borrower that such tax has
been paid.


 


(d)  
Delivery of
Common Stock
Upon Conversion.
Upon receipt
by the
Borrower from
the Holder of
a facsimile
transmission or e-mail
(or other
reasonable means
of communication)
of a Notice
of Conversion
meeting the requirements
for conversion
as provided in this Section
1.4, the Borrower shall issue
and deliver or cause
to be issued and delivered
to or upon the order of the Holder
certificates for the Common Stock issuable
upon such conversion within
three (3) business days after
such receipt (the “Deadline”)
(and, solely in the case of conversion
of the entire
unpaid principal amount
hereof, surrender of
this Note)
in accordance with the
terms hereof and the
Purchase Agreement.


 


(e)   
Obligation of
Borrower to
Deliver Common
Stock.
Upon receipt
by the
Borrower of
a Notice
of Conversion,
the Holder
shall be
deemed to
be the holder
of record
of the Common
Stock issuable
upon such
conversion, the
outstanding principal
amount and
the amount of accrued and
unpaid interest on this Note
shall be reduced to reflect
such conversion, and, unless
the Borrower defaults on its
obligations under this Article
I, all rights with
respect to the portion of this Note
being so converted shall forthwith
terminate except the right to receive
the Common Stock or other securities,
cash or other assets, as
herein provided, on such conversion.
If the Holder shall
have given a Notice
of Conversion as provided herein,
the Borrower’s obligation
to issue and deliver the certificates
for Common Stock shall be absolute
and unconditional, irrespective
of the absence of any action by the Holder
to enforce the same, any waiver
or consent with
respect to any provision thereof,
the recovery of any judgment
against any person or any action
to enforce the same, any failure
or delay in the enforcement of any other
obligation of
the Borrower
to the holder
of record,
or any setoff,
counterclaim, recoupment,
limitation or
termination, or
any breach
or alleged
breach by
the Holder of any
obligation to
the Borrower, and
irrespective of any other circumstance
which might otherwise
limit such obligation
of the Borrower to
the Holder in connection
with such conversion.
The Conversion Date specified
in the Notice of Conversion shall
be the Conversion Date so long
as the Notice of Conversion is received
by the Borrower before
6:00 p.m., New York, New York
time, on such date.




    	5



    	 



    

(f)   
 Delivery of
Common Stock
by Electronic
Transfer. In
lieu of
delivering physical
certificates representing
the Common Stock
issuable upon conversion,
provided the Borrower is
participating in
the Depository Trust Company (“DTC”)
Fast Automated Securities
Transfer (“FAST”) program,
upon request
of the Holder and
its compliance with the provisions
contained in Section 1.1 and in this
Section 1.4, the Borrower shall use
its best efforts to
cause its transfer
agent to electronically transmit
the Common Stock issuable
upon conversion to
the Holder by
crediting the account of
Holder’s Prime Broker
with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”)
system.


 


(g)  
Failure to
Deliver Common
Stock Prior
to Deadline.
Without in any
way limiting the
Holder’s right to pursue
other remedies, including
actual damages and/or
equitable relief,
the parties
agree that
if delivery of
the Common Stock
issuable upon conversion
of this Note is not delivered
by the Deadline (other than a failure
due to the circumstances described
in Section 1.3 above,
which failure shall be governed
by such Section)
the Borrower shall
pay to the Holder $2,000 per day
in cash, for each day beyond
the Deadline that the Borrower
fails to deliver
such Common Stock.
Such cash
amount shall
be paid
to Holder
by the fifth day of the month following
the month in which it has accrued
or, at the option of the Holder
(by written notice
to the Borrower by the first
day of the month following the
month in which it has
accrued), shall
be added to the principal
amount of this
Note, in
which event
interest shall accrue
thereon in accordance
with the terms
of this Note and
such additional principal
amount shall be convertible
into Common Stock in accordance
with the terms of this Note.
The Borrower agrees that
the right to convert is a
valuable right to the Holder.
The damages resulting from
a failure, attempt to frustrate,
interference with such conversion
right are difficult if not impossible
to qualify. Accordingly
the parties acknowledge that
the liquidated damages provision
contained in this Section 1.4(g)
are justified.


 


1.5 
 Concerning the
Shares.
The shares
of Common Stock
issuable upon conversion
of this Note
may not be
sold or transferred
unless (i)
such shares
are sold pursuant
to an
effective registration
statement under
the Act or
(ii) the
Borrower or
its transfer
agent shall have
been furnished with an
opinion of counsel (which
opinion shall be in form, substance
and scope customary for
opinions of counsel in comparable transactions)
to the effect that the shares
to be sold
or transferred
may be sold or
transferred pursuant
to an
exemption from
such registration
or (iii) such shares are
sold or transferred pursuant
to Rule 144 under the Act (or
a successor rule)
(“Rule 144”) or
(iv) such
shares are transferred
to an
“affiliate” (as defined
in Rule 144) of the Borrower who
agrees to
sell or otherwise
transfer the shares only in
accordance with this
Section 1.5 and
who is an Accredited
Investor (as defined in the Purchase
Agreement). Except as otherwise
provided in the Purchase Agreement
(and subject to the removal
provisions set forth
below), until such
time as
the shares
of Common Stock
issuable upon conversion
of this Note have
been registered under the Act
or otherwise may
be sold pursuant to Rule 144 without any
restriction as to the number
of securities as of a particular
date that can then be immediately
sold, each
certificate for shares
of Common
Stock issuable
upon conversion of
this Note
that has not been
so included in an effective
registration statement or that
has not been sold pursuant
to an effective
registration statement
or an exemption
that permits
removal of the legend,
shall bear a legend substantially
in the following form, as
appropriate:




    	6



    	 



    

“NEITHER
THE ISSUANCE
AND SALE OF
THE SECURITIES
REPRESENTED BY
THIS CERTIFICATE
NOR THE SECURITIES
INTO WHICH
THESE SECURITIES
ARE EXERCISABLE
HAVE BEEN
REGISTERED UNDER
THE SECURITIES
ACT OF
1933, AS
AMENDED, OR APPLICABLE
STATE SECURITIES
LAWS. THE SECURITIES
MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN
THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS
AMENDED, OR (B) AN
OPINION OF COUNSEL
(WHICH COUNSEL SHALL
BE SELECTED BY
THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE
144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY
BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.”


 


The
legend set
forth above
shall be
removed and
the Borrower
shall issue to
the Holder
a new certificate
therefore free
of any
transfer legend
if (i)
the Borrower
or its transfer
agent shall
have received
an opinion
of counsel, in
form, substance
and scope
customary for opinions of counsel
in comparable transactions, to the effect
that a public sale or transfer of
such Common Stock may be made
without registration under the
Act, which opinion shall be
accepted by the Company so
that the sale
or transfer
is effected
or (ii)
in the case
of the Common Stock
issuable upon conversion of this Note,
such security is registered for
sale by the Holder under an
effective registration statement
filed under the Act or otherwise
may be sold pursuant
to Rule 144 without any
restriction as to the number
of securities as of a particular date
that can then be immediately
sold. In the event that the Company
does not accept the opinion of counsel
provided by the Holder with respect
to the transfer of Securities
pursuant to an exemption from registration,
such as Rule 144 or Regulation
S, at the Deadline, it will
be considered an Event
of Default pursuant to Section
3.2 of the Note.


 


		1.6	Effect
                                         of
                                         Certain
                                         Events.



 


(a)   
Effect of
Merger,
Consolidation,
Etc.
At the
option of the
Holder, the
sale, conveyance
or disposition of
all or
substantially all
of the assets
of the Borrower,
the effectuation
by the Borrower
of a transaction or
series of related
transactions in which
more than 50% of the voting
power of the Borrower is disposed of,
or the consolidation, merger or
other business combination
of the Borrower with or into
any other Person
(as defined below) or Persons
when the Borrower is not the survivor
shall either: (i) be deemed to
be an Event of Default
(as defined
in Article III)
pursuant to which
the Borrower
shall be
required to
pay to the Holder
upon the consummation of
and as
a condition to
such transaction
an amount
equal to
the Default Amount (as
defined in Article III) or (ii)
be treated pursuant to Section
1.6(b) hereof. “Person”
shall mean any
individual, corporation,
limited liability
company, partnership, association,
trust or other entity or
organization.


 


(b)  
Adjustment Due
to Merger,
Consolidation, Etc.
If, at
any time
when this
Note is
issued and
outstanding and
prior to
conversion of
all of
the Notes, there
shall be any
merger,  consolidation,
 exchange 
of  shares, 
recapitalization,  reorganization,
 or  other
 similar




    	7



    	 



    

event,
as a
result of which
shares of
Common Stock
of the Borrower
shall be changed
into the same
or a different
number of shares
of another
class or
classes of
stock or securities
of the Borrower
or another entity,
or in case
of any sale
or conveyance
of all
or substantially all
of the assets of the Borrower
other than in connection with
a plan of complete liquidation
of the Borrower, then the Holder
of this Note shall
thereafter have the right
to receive upon
conversion of this Note, upon
the basis and upon the terms
and conditions specified
herein and
in lieu of the shares of Common
Stock immediately theretofore issuable
upon conversion, such stock,
securities or assets
which the Holder would
have been entitled
to receive in such
transaction had this Note
been converted in full immediately
prior to such transaction
(without regard to any limitations
on conversion set forth
herein), and in any such
case appropriate provisions shall
be made with respect
to the rights and interests
of the Holder of this Note to the end
that the provisions hereof (including,
without limitation, provisions
for adjustment of the Conversion
Price and of the number of shares
issuable upon conversion of the Note)
shall thereafter be applicable,
as nearly as
may be practicable in relation
to any securities or assets thereafter
deliverable upon the conversion
hereof. The Borrower shall
not affect
any transaction described
in this Section
1.6(b) unless
(a) it
first gives,
to the extent
practicable, thirty (30)
days prior
written notice (but
in any event at
least fifteen (15) days prior
written notice)
of the record
date of the special meeting of shareholders
to approve, or if there is no such record
date, the consummation of, such
merger, consolidation, exchange of shares,
recapitalization, reorganization or other
similar event or sale of
assets (during which time the Holder
shall be entitled to convert
this Note) and (b)
the resulting successor or acquiring
entity (if not the Borrower)
assumes by written instrument
the obligations of this Section
1.6(b). The
above provisions shall similarly
apply to successive consolidations, mergers,
sales, transfers or share exchanges.


 


(c)   
Adjustment Due
to Distribution.
If the
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 the Borrower’s
shareholders in cash or shares
(or rights to acquire shares) of capital
stock of a subsidiary (i.e.,
a spin-off)) (a
“Distribution”), then the
Holder of this Note
shall be entitled, upon any conversion
of this Note after the date of
record for determining shareholders
entitled to such Distribution, to receive
the amount of
such assets which would
have been payable to the Holder
with respect to the shares of
Common Stock issuable upon such
conversion had such Holder been
the holder of such shares of Common Stock
on the record date for
the determination of shareholders
entitled to such Distribution.


 


(d)  
Adjustment Due
to Dilutive
Issuance.
If, at
any time
when any
Notes are
issued and
outstanding, the
Borrower issues
or sells,
or in accordance
with this Section
1.6(d) hereof
is deemed
to have issued
or sold, any
shares of Common
Stock for
no consideration
or for a consideration
per share (before deduction of reasonable
expenses or commissions or underwriting
discounts or
allowances in
connection therewith)
less than
the Conversion
Price in effect
on the date of such issuance
(or deemed issuance) of such
shares of Common Stock (a “Dilutive
Issuance”), then immediately
upon the Dilutive
Issuance, the Conversion Price
will be reduced to the amount
of the
consideration per share received
by the
Borrower in such Dilutive
Issuance.




    	8



    	 



    

The
Borrower shall
be deemed
to have
issued or
sold shares
of Common Stock
if the Borrower
in any
manner issues
or grants
any warrants,
rights or options
(not including
employee stock option
plans), whether
or not immediately exercisable,
to subscribe for
or to purchase Common Stock
or other securities
convertible into or
exchangeable for
Common Stock (“Convertible
Securities”) (such warrants,
rights and
options to purchase
Common Stock or Convertible
Securities are hereinafter referred
to as “Options”)
and the price per share
for which Common Stock is issuable
upon the exercise of such Options
is less than the Conversion
Price then in effect, then the
Conversion Price shall
be equal to such price per share.
For purposes of the preceding sentence,
the “price per share for which
Common Stock is issuable upon
the exercise of such Options”
is determined by dividing (i)
the total amount, if any, received
or receivable by the
Borrower as
consideration for the issuance or
granting of all
such Options, plus the minimum
aggregate amount of additional
consideration, if any, payable
to the Borrower upon the exercise of all
such Options,
plus, in the case of Convertible
Securities issuable upon the exercise of such
Options, the minimum aggregate amount
of additional consideration payable
upon the conversion or exchange
thereof at the time such Convertible
Securities first become convertible
or exchangeable, by (ii)
the maximum total number of shares
of Common Stock issuable upon
the exercise of all such
Options (assuming full conversion
of Convertible Securities, if
applicable). No further
adjustment to the Conversion Price
will be made upon the
actual issuance of
such Common Stock upon the exercise
of such Options or
upon the conversion or exchange
of Convertible Securities issuable
upon exercise of such Options.


 


Additionally,
the Borrower
shall be deemed
to have issued
or sold shares
of Common Stock
if the Borrower
in any
manner issues
or sells
any Convertible
Securities, whether
or not immediately convertible
(other than
where the same are
issuable upon  the exercise
of Options), and the price per share for
which Common Stock is issuable
upon such conversion or exchange
is less
than the Conversion
Price then in
effect, then
the Conversion Price shall be
equal to such price per share.
For the purposes of the preceding sentence,
the “price per share for
which Common Stock is issuable
upon such conversion or exchange”
is determined by
dividing (i) the total amount,
if any, received or
receivable by the Borrower as
consideration for the issuance or sale of all
such Convertible Securities,
plus the minimum aggregate amount
of additional consideration, if any,
payable to the Borrower upon the conversion
or exchange thereof
at the time such Convertible
Securities first become convertible
or exchangeable, by (ii)
the maximum total number of shares
of Common Stock issuable upon
the conversion
or exchange of
all such
Convertible Securities. No
further adjustment
to the Conversion
Price will
be made
upon the actual
issuance of such
Common Stock
upon conversion or
exchange of such Convertible Securities.


 


(e)   
Purchase Rights.
If,
at
any time
when any
Notes are
issued and
outstanding, the Borrower
issues any convertible
securities or rights
to purchase
stock, warrants,
securities or other
property (the
“Purchase Rights”)
pro rata
to the record
holders of any
class of
Common Stock,
then the
Holder of this Note will
be entitled to
acquire, upon
the terms applicable
to such
Purchase Rights,
the aggregate Purchase
Rights which
such Holder
could have acquired
if such Holder
had held the number of shares
of Common Stock acquirable upon
complete conversion of this Note
(without regard to any limitations
on conversion contained herein)
immediately before the date
on which a record is
taken for the grant, issuance
or sale of such
Purchase Rights or, if no such
record is taken, the date as
of which the record holders
of Common Stock are to be
determined for the grant,
issue or sale of
such Purchase Rights.




    	9



    	 



    

(f)   
 Notice of
Adjustments.
Upon the occurrence
of each
adjustment or readjustment
of the Conversion
Price as
a result
of the events
described in
this Section
1.6, the Borrower,
at its expense,
shall promptly
compute such
adjustment or
readjustment and
prepare and furnish to the Holder
a certificate setting forth such
adjustment or readjustment and
showing in detail the facts upon which
such adjustment or readjustment is
based. The Borrower
shall, upon the written request
at any time of the Holder, furnish
to such Holder a like certificate
setting forth
(i) such adjustment
or readjustment,
(ii) the
Conversion Price
at the time
in effect and
(iii) the number
of shares
of Common Stock
and the amount,
if any, of
other securities
or property which at the
time would be received upon conversion
of the Note.


 


1.7 
Trading Market
Limitations. Unless
permitted by
the applicable
rules and
regulations of the
principal securities
market on which
the Common Stock
is then
listed or
traded, in
no event shall the Borrower
issue upon conversion of or
otherwise pursuant to
this Note and
the other Notes issued pursuant
to the Purchase Agreement more
than the maximum number
of shares of Common
Stock that
the Borrower can issue pursuant
to any rule of the principal
United States securities market
on which the Common Stock is then
traded (the “Maximum Share Amount”),
which shall be 4.99%
of the total
shares outstanding on the Closing
Date (as defined in the Purchase Agreement),
subject to equitable adjustment
from time to time for
stock splits, stock dividends,
combinations, capital reorganizations
and similar events
relating to the Common Stock occurring
after the date hereof.
Once the Maximum Share Amount
has been issued,
if the Borrower fails to eliminate
any prohibitions under applicable
law or the rules or regulations
of any stock exchange, interdealer
quotation system or other self-regulatory
organization with jurisdiction
over the Borrower
or any of its securities
on the Borrower’s ability
to issue shares
of Common Stock
in excess
of the Maximum Share
Amount, in lieu
of any further
right to convert this Note, this
will be considered an
Event of Default under Section
3.3 of the Note.


 


1.8 
Status as
Shareholder. Upon
submission of a
Notice of
Conversion by
a Holder,
(i) the
shares covered
thereby (other than
the shares,
if any,
which cannot
be issued
because their issuance would
exceed such Holder’s
allocated portion of the Reserved
Amount or Maximum Share Amount)
shall be deemed converted into
shares of Common Stock
and (ii) the Holder’s
rights as
a Holder of such
converted portion
of this Note shall cease
and terminate, excepting
only the right to
receive certificates
for such
shares of
Common Stock
and to
any remedies provided herein
or otherwise available at
law or in equity to such Holder because
of a failure by the Borrower
to comply with the terms of this Note.
Notwithstanding the foregoing, if a Holder
has not received certificates
for all shares
of Common Stock prior to the
tenth (10th) business
day after the expiration of the
Deadline with respect
to a conversion of any portion of this Note
for any reason, then (unless
the Holder otherwise elects
to retain its status as
a holder of Common Stock by so notifying
the Borrower) the Holder shall
regain the rights of a Holder
of this Note with
respect to such unconverted portions
of this Note and the Borrower
shall, as soon as practicable,
return such unconverted Note
to the Holder or, if the Note has not
been surrendered, adjust its records
to reflect that such portion
of this Note has not been
converted. In all cases, the
Holder shall retain all
of its rights and remedies
(including, without limitation,
(i) the right to receive Conversion
Default Payments pursuant to
Section 1.3 to the extent required thereby
for such Conversion Default
and any subsequent Conversion Default and
(ii) the right to




    	10



    	 



    

have
the Conversion
Price with
respect to
subsequent conversions
determined in accordance
with Section 1.3)
for the Borrower’s failure
to convert this Note.


 


1.9 
Prepayment. Notwithstanding
anything to the
contrary contained in
this Note,
at any
time during the
period beginning
on the Issue
Date and
ending on the
date which
is one hundred
twenty (120)
days following
the Issue
Date, the
Borrower shall
have the right,
exercisable on not
less than
three (3) Trading
Days prior
written notice
to the Holder
of the Note to
prepay the outstanding
Note (principal and
accrued interest),
in full, in
accordance with
this Section 1.9. Any notice
of prepayment hereunder (an “Optional
Prepayment Notice”) shall
be delivered to the Holder of the Note
at its registered
addresses and shall
state: (1)
that the Borrower
is exercising its right to prepay
the Note, and (2) the date
of prepayment which
shall be not more
than three (3) Trading
Days from the date of the Optional
Prepayment Notice. On the date
fixed for prepayment (the “Optional
Prepayment Date”), the Borrower
shall make payment of the Optional
Prepayment Amount (as
defined below) to or upon the order
of the Holder as specified
by the Holder in writing to the
Borrower at least
one (1) business day prior to the Optional
Prepayment Date. If the Borrower
exercises its right
to prepay the Note,
the Borrower shall make
payment to the Holder of an amount
in cash (the “Optional
Prepayment Amount”) equal
to 140%,
multiplied by
the sum of: (w) the then
outstanding principal amount
of this Note plus (x)
accrued and unpaid interest on
the unpaid principal amount
of this Note to the Optional
Prepayment Date
plus (y) Default
Interest, if any,
on the amounts referred
to in clauses
(w) and


(x)
plus (z)
any amounts
owed to
the Holder
pursuant to
Sections 1.3
and 1.4(g)
hereof. If
the Borrower
delivers an
Optional Prepayment
Notice and
fails to pay
the Optional
Prepayment Amount
due to the
Holder of
the Note within
two (2)
business days
following the Optional
Prepayment Date,
the Borrower
shall forever
forfeit its right
to prepay the Note
pursuant to this
Section 1.9.


 


 


Notwithstanding
anything to
the contrary contained
in this Note,
at any
time during
the period beginning
on the date
which is
one hundred
twenty-one (121)
days following the
Issue Date and
ending on the date
which is one hundred eighty (180)
days following the Issue
Date, the Borrower shall have
the right, exercisable on not
less than three (3) Trading
Days prior written notice
to the Holder of the Note to
prepay the outstanding
Note (principal and
accrued interest), in
full, in
accordance with
this Section
1.9. Any Optional
Prepayment Notice
shall be delivered
to the Holder of
the Note
at its
registered addresses and
shall state:
(1) that
the Borrower is exercising
its right to prepay the Note,
and (2) the
date of
prepayment which shall be not
more than
three (3)
Trading Days
from the date
of the Optional
Prepayment Notice. On
the Optional Prepayment Date,
the Borrower shall make payment
of the Second Optional Prepayment
Amount (as defined below)
to or upon the order of the Holder as
specified by the Holder in writing
to the Borrower at least
one (1) business day
prior to the Optional Prepayment
Date. If the Borrower exercises
its right to prepay the Note,
the Borrower
shall make
payment to the Holder of an
amount in cash (the “Second
Optional Prepayment Amount”) equal
to 150%, multiplied
by the sum of:
(w) the then outstanding principal
amount of this Note
plus (x) accrued and unpaid
interest on the unpaid principal
amount of this Note to the Optional
Prepayment Date plus (y)
Default Interest, if any,
on the amounts referred to
in clauses
(w) and (x) plus (z) any
amounts owed to the Holder
pursuant to Sections 1.3 and
1.4(g) hereof.
If the Borrower delivers an
Optional Prepayment Notice and
fails to pay the Second Optional
Prepayment Amount due to




    	11



    	 



    

the
Holder of
the Note within two
(2) business days
following the Optional Prepayment
Date, the Borrower
shall forever forfeit its right
to prepay the Note pursuant to this
Section 1.9.


 


After
the expiration
of one
hundred eighty
(180) following
the date
of the Note,
the Borrower shall have
no right of prepayment.


 


 


ARTICLE
II.
 CERTAIN COVENANTS


 


2.1 
Distributions on
Capital Stock.
So long as
the Borrower
shall have
any obligation
under this
Note, the Borrower
shall not without
the Holder’s
written consent
(a) pay, declare
or set
apart for
such payment,
any dividend
or other
distribution (whether
in cash,
property or other
securities) on shares of
capital stock other
than dividends on shares of
Common Stock solely in the form
of additional shares of Common Stock
or (b) directly or indirectly or through
any subsidiary make any
other payment or distribution
in respect of its capital stock
except for distributions pursuant
to any shareholders’
rights plan which is approved
by a majority of the
Borrower’s disinterested directors.


 


2.2 
Restriction on
Stock Repurchases.
So long as
the Borrower
shall have
any obligation
under this Note,
the Borrower
shall not
without the
Holder’s written
consent redeem, repurchase
or otherwise
acquire (whether
for cash
or in exchange
for property or
other securities
or otherwise) in any one
transaction or series
of related transactions any
shares of capital
stock of the Borrower or
any warrants, rights
or options to purchase or
acquire any such shares.


 


2.3 
Borrowings. So
long as the
Borrower shall
have any
obligation under
this Note,
the Borrower
shall not, without
the Holder’s
written consent,
(a) create,
incur, assume
guarantee, endorse, contingently
agree to purchase or otherwise
become liable upon the obligation
of any other
person, firm, partnership, joint venture
or corporation, except by
the endorsement of negotiable
instruments for deposit
or collection, or
(b) suffer
to exist any liability for borrowed
money, except any borrowings that does
not render the Borrower a "Shell"
company as defined in Rule
12b-2 under the Securities Exchange
Act of 1934.


 


2.4 
Sale of
Assets.
So long as
the Borrower
shall have any
obligation under
this Note,
the Borrower
shall not, without
the Holder’s
written consent,
sell, lease
or otherwise
dispose of any
significant portion
of its assets
outside the ordinary course
of business. Any consent
to the disposition of any assets
may be conditioned on a specified
use of the proceeds of disposition.


 


2.5 
Advances and
Loans. So
long as
the Borrower shall
have any
obligation under
this Note,
the Borrower
shall not,
without the
Holder’s written
consent, lend
money, give
credit or make
advances to
any person, firm,
joint venture
or corporation, including,
without limitation, officers,
directors, employees, subsidiaries
and affiliates of the Borrower,
except loans, credits
or advances (a) in existence
or committed on the date hereof
and which the Borrower
has informed
Holder in writing
prior to the date
hereof, (b)
made in the ordinary course
of business or
(c) not in excess of
$100,000.




    	12



    	 



    

ARTICLE
III.
 EVENTS OF
DEFAULT


 


If
any
of the
following events of default (each,
an “Event
of Default”) shall occur:


 


3.1 
Failure to
Pay Principal
or Interest.
The Borrower
fails to pay
the principal
hereof or
interest thereon
when due on
this Note,
whether at
maturity, upon acceleration
or otherwise.


 


3.2 
Conversion and
the Shares.
The Borrower
fails to
issue shares
of Common Stock
to the Holder
(or announces
or threatens
in writing
that it
will not
honor its obligation
to do so) upon
exercise by the Holder of the
conversion rights
of the Holder in
accordance with
the terms of this
Note, fails
to transfer or cause its
transfer agent
to transfer (issue)
(electronically or in certificated form)
any certificate for shares
of Common Stock issued to the
Holder upon conversion of or otherwise
pursuant to this Note as and
when required by this Note, the Borrower
directs its transfer agent not
to transfer or delays,
impairs, and/or hinders its transfer
agent in transferring (or issuing)
(electronically or in certificated form) any
certificate for shares of Common
Stock to be issued to the Holder
upon conversion of or otherwise
pursuant to this Note as
and when required by this Note,
or fails to remove (or
directs its transfer agent not to remove
or impairs, delays,
and/or hinders its transfer
agent from removing)
any restrictive legend
(or to withdraw any stop transfer
instructions in respect thereof) on any certificate
for any shares of
Common Stock issued
to the Holder
upon conversion
of or otherwise
pursuant to this Note
as and when required by this
Note (or makes any written
announcement, statement or threat
that it does not intend
to honor the obligations described
in this paragraph) and any
such failure
shall continue uncured (or
any written announcement, statement
or threat not to honor its obligations
shall not be rescinded
in writing)
for three
(3) business
days after
the Holder
shall have delivered
a Notice of Conversion. It
is an
obligation of the
Borrower to remain
current in its obligations to its
transfer agent. It shall be an
event of default of this Note,
if a conversion of this Note
is delayed,
hindered or frustrated
due to a balance owed
by the Borrower to its
transfer agent. If at
the option of the Holder, the Holder
advances any funds to the Borrower’s
transfer agent in order to process
a conversion, such
advanced funds
shall be paid by the Borrower
to the Holder within forty eight
(48) hours of a demand from the Holder.


 


3.3 
Breach of
Covenants.
The Borrower
breaches any material
covenant or other
material term
or condition
contained in
this Note
and any
collateral documents
including but
not limited
to the Purchase
Agreement and
such breach
continues for
a period of
ten (10)
days after
written notice thereof to the
Borrower from the Holder.


 


3.4 
Breach of
Representations and
Warranties. Any
representation or
warranty of
the Borrower
made herein or
in any
agreement, statement
or certificate
given in
writing pursuant hereto
or in connection
herewith (including,
without limitation,
the Purchase
Agreement), shall
be false or misleading in any material
respect when made and the breach
of which has (or
with the passage of
time will have)
a material adverse
effect on the rights of the
Holder with respect to this Note
or the Purchase
Agreement.


 


3.5 
Receiver or
Trustee.
The Borrower
or any
subsidiary of
the Borrower
shall make
an assignment
for the benefit
of creditors,
or apply for
or consent
to the appointment
of a




    	13



    	 



    

receiver
or trustee
for it
or for
a substantial
part of
its property
or business,
or such
a receiver
or trustee
shall otherwise be appointed.


 


3.6 
Judgments. 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 $50,000,
and shall remain
unvacated, unbonded
or unstayed
for a
period of
twenty


(20)
days unless
otherwise consented
to by
the Holder,
which consent
will not
be unreasonably withheld.


 


3.7 
Bankruptcy. Bankruptcy,
insolvency, reorganization
or  liquidation
proceedings or
other proceedings,
voluntary or
involuntary, for
relief under any
bankruptcy law or
any law for
the relief
of debtors shall
be instituted by
or against the Borrower
or any subsidiary of
the Borrower.


 


3.8 
Delisting of
Common Stock. The
Borrower shall fail
to maintain the listing of
the Common Stock
on at
least one
of the OTCBB,
OTC Markets
or an
equivalent replacement
exchange, the Nasdaq
National Market,
the Nasdaq
SmallCap Market,
the New
York Stock
Exchange, or
the American Stock Exchange.


 


3.9 
Failure to
Comply with
the Exchange
Act.
The Borrower
shall fail
to comply with
the reporting
requirements of
the Exchange Act;
and/or the Borrower
shall cease
to be subject
to the reporting requirements
of the Exchange
Act.


 


3.10         
Liquidation. Any
dissolution, liquidation,
or winding
up of Borrower
or any substantial
portion of its business.


 


3.11         
Cessation of Operations.
Any cessation
of operations
by Borrower
or Borrower
admits it
is otherwise
generally unable to
pay its
debts as
such debts
become due,
provided, however, that
any disclosure
of the Borrower’s
ability to continue as a
“going concern” shall
not be an admission that
the Borrower cannot
pay its debts as
they become due.


 


3.12         
Maintenance of
Assets.The failure
by Borrower
to maintain
any material intellectual
property rights, personal,
real property or
other assets
which are necessary to
conduct its business (whether
now or in the
future).


 


3.13         
Financial Statement
Restatement. The
restatement of any
financial statements
filed by the
Borrower with
the SEC
for any date
or period from
two years
prior to the
Issue Date
of this Note
and until this
Note is no
longer outstanding,
if the result
of such restatement
would, by comparison
to the unrestated
financial statement,
have constituted
a material adverse effect
on the rights of the Holder with
respect to this Note or the Purchase
Agreement.


 


3.14         
Reverse Splits.The Borrower
effectuates a reverse
split of its
Common Stock without
twenty (20)
days prior written notice to
the Holder.




    	14



    	 



    

3.15         
 Replacement of Transfer
Agent. In
the event that
the Borrower proposes to replace
its transfer
agent, the Borrower
fails to provide,
prior to the
effective date
of such
replacement, a
fully executed
Irrevocable Transfer
Agent Instructions
in a form
as initially delivered
pursuant to the Purchase Agreement
(including but not limited to
the provision to irrevocably
reserve shares of Common Stock
in the Reserved Amount)
signed by the successor transfer
agent to Borrower and the Borrower.


 


 


3.16         
Cross-Default. Notwithstanding
anything to the
contrary contained
in this Note
or the other
related or companion
documents, a breach
or default
by the
Borrower of
any covenant
or other term
or condition
contained in any of
the Other Agreements,
after the passage of
all applicable notice and cure
or grace periods,
shall, at the
option of the Holder,
be considered a default
under this Note and the Other
Agreements, in which event the Holder
shall be entitled
(but in no event required) to
apply all rights
and remedies of
the Holder under the terms of this Note
and the
Other Agreements
by reason
of a
default under
said Other
Agreement or
hereunder. “Other Agreements”
means, collectively, all agreements
and instruments between, among
or by: (1) the Borrower,
and, or for the benefit of,
(2) the Holder and
any affiliate
of the Holder, including, without
limitation, promissory notes;
provided, however, the term “Other
Agreements” shall not include
the related or companion documents to
this Note. Each of the loan
transactions will be cross-defaulted
with each other loan
transaction and with all
other existing and future debt
of Borrower to the
Holder.


 


Upon
the occurrence
and during
the continuation
of any
Event of
Default specified
in Section
3.1 (solely with
respect to failure
to pay the
principal hereof
or interest
thereon when
due at
the Maturity Date),
the Note
shall become
immediately due and
payable and
the Borrower
shall pay
to the Holder, in
full satisfaction
of its obligations
hereunder, an amount
equal to the Default
Sum (as defined herein).
UPON THE OCCURRENCE AND
DURING THE CONTINUATION OF ANY
EVENT OF DEFAULT SPECIFIED
IN SECTION 3.2, THE
NOTE SHALL BECOME
IMMEDIATELY DUE AND
PAYABLE AND THE
BORROWER SHALL PAY TO
THE HOLDER, IN FULL
SATISFACTION OF ITS OBLIGATIONS HEREUNDER,
AN AMOUNT EQUAL TO: (Y)
THE DEFAULT SUM (AS
DEFINED


HEREIN);
MULTIPLIED BY
(Z) TWO (2).
Upon the occurrence
and during the continuation
of any
Event of
Default specified
in Sections
3.1 (solely with
respect to failure
to pay
the principal
hereof or
interest thereon
when due
on this Note
upon a Trading
Market Prepayment
Event pursuant
to Section
1.7 or upon
acceleration), 3.3,
3.4, 3.6, 3.8,
3.9, 3.11, 3.12,
3.13, 3.14, and/or


3.
15 exercisable
through the
delivery of
written notice
to the Borrower
by such
Holders (the
“Default Notice”),
and upon the
occurrence of
an Event
of Default specified
the remaining
sections of
Articles III
(other than
failure to
pay the principal
hereof or interest
thereon at
the Maturity Date specified
in Section 3,1 hereof),
the Note shall become
immediately due and payable
and the Borrower
shall pay to the Holder, in full
satisfaction of its obligations
hereunder, an amount equal
to the greater of (i) 150% times
the sum of (w) the then
outstanding principal amount
of this Note plus (x) accrued
and unpaid interest on the unpaid
principal amount of this Note
to the date
of payment (the
“Mandatory Prepayment Date”)
plus (y) Default
Interest, if any, on
the amounts
referred to in
clauses (w)
and/or (x) plus (z)
any amounts owed
to the Holder
pursuant to Sections 1.3 and
1.4(g) hereof (the then
outstanding principal amount
of this Note to the date of
payment plus the amounts
referred to in clauses (x), (y)
and (z) shall collectively be known
as the “Default Sum”)
or (ii) the “parity value”
of the Default Sum to be prepaid, where




    	15



    	 



    

parity
value means
(a) the highest
number of
shares of
Common Stock
issuable upon
conversion of
or otherwise
pursuant to
such Default
Sum in accordance
with Article
I, treating
the Trading Day
immediately preceding the Mandatory
Prepayment Date
as the “Conversion Date”
for purposes of determining the
lowest applicable Conversion Price,
unless the Default Event arises
as a result of a breach in respect
of a specific Conversion Date in which case
such Conversion Date shall be
the Conversion Date), multiplied
by (b) the highest
Closing Price for the Common
Stock during the period
beginning on the date of first
occurrence of the Event
of Default and ending
one day prior to the Mandatory
Prepayment Date (the
“Default Amount”) and
all other amounts
payable hereunder shall immediately
become due and payable, all
without demand, presentment or
notice, all
of which hereby are expressly
waived, together with
all costs, including, without
limitation, legal fees and
expenses, of collection, and the Holder
shall be entitled to exercise all
other rights and remedies
available at law or in
equity.


 


If
the Borrower
fails to pay
the Default
Amount within
five (5)
business days
of written
notice that
such amount
is due and
payable, then the
Holder shall
have the
right at
any time,
so long as
the Borrower
remains in
default (and
so long and
to the extent that
there are
sufficient authorized
shares), to require
the Borrower, upon
written notice,
to immediately issue,
in lieu of the Default
Amount, the number of shares
of Common Stock of the Borrower
equal to the Default Amount divided
by the Conversion Price
then in effect.


 


ARTICLE
IV.
MISCELLANEOUS


 


4.1 
Failure or
Indulgence Not
Waiver.
No failure
or delay on
the part
of the
Holder in
the exercise of
any power,
right or
privilege hereunder
shall operate
as a
waiver thereof,
nor shall
any single
or partial
exercise of any
such power,
right or privilege preclude other or further
exercise thereof or of any
other right, power or privileges.
All rights and remedies
existing hereunder
are cumulative
to, and
not exclusive
of, any
rights or
remedies otherwise available.


 


4.2 
Notices. All
notices, demands,
requests, consents,
approvals, and
other communications
required or
permitted hereunder
shall be in
writing and,
unless otherwise
specified herein,
shall be
(i) personally
served, (ii)
deposited in
the mail, registered
or certified,
return receipt requested, postage
prepaid, (iii) delivered
by reputable air courier service
with charges prepaid, or
(iv) transmitted by
hand delivery, telegram, or facsimile,
addressed as set forth
below or
to such
other address
as such
party shall have
specified most
recently by written
notice. Any
notice or other communication
required or permitted
to be given
hereunder shall
be deemed
effective (a) upon hand
delivery or delivery by facsimile,
with accurate
confirmation generated by
the transmitting facsimile machine,
at the address
or number designated
below (if delivered on a
business day during normal business
hours where such notice
is to be received), or the first
business day
following such delivery
(if delivered
other than on
a business day
during normal business hours
where such notice is to be received)
or (b) on the second business
day following the date
of mailing by
express courier service,
fully prepaid, addressed to such
address, or
upon actual receipt of such
mailing, whichever shall first
occur. The addresses for
such communications shall be:




    	16



    	 



    

If
to the Borrower, to:


RICH
PHARMACEUTICALS, INC.


9595
Wilshire Boulevard -
Suite 900 Beverly
Hills, CA 90212


Attn:
BEN CHANG, Chief Executive
Officer facsimile:


 


With
a copy by
fax only to (which
copy shall not constitute notice):
[enter name of law
firm]


Attn:
[attorney name]
[enter address line 1] [enter
city, state, zip]


facsimile:
[enter fax number]


 


If
to the Holder:


ASHER
ENTERPRISES, INC.


1
Linden Pl., Suite 207
Great Neck, NY. 11021
Attn: Curt Kramer,
President facsimile: 516-498-9894


 


With
a copy by
fax only to (which
copy shall not constitute notice):
Naidich Wurman Birnbaum &
Maday, LLP


80
Cuttermill Road, Suite 410
Great Neck, NY 11021


Attn:
Bernard S. Feldman,
Esq. facsimile: 516-466-3555


 


4.3 
Amendments. This
Note and
any provision
hereof may
only be
amended by
an instrument
in writing signed
by the
Borrower and the Holder.
The term
“Note” and
all reference thereto,
as used
throughout this instrument,
shall mean this
instrument (and
the other Notes
issued pursuant
to the Purchase Agreement)
as originally executed,
or if later amended
or supplemented, then as so
amended or supplemented.


 


4.4 
Assignability. This
Note shall
be binding upon
the Borrower
and its
successors and
assigns, and
shall inure
to be the
benefit of
the Holder
and its
successors and
assigns. Each
transferee of this Note must
be an “accredited
investor” (as defined in Rule 501(a) of the 1933
Act). Notwithstanding
anything in this Note to the contrary, this Note
may be pledged as collateral
in connection with a bona
fide margin account or other
lending arrangement.


 


4.5 
Cost of Collection.
If default
is made in the
payment of this Note,
the Borrower shall pay
the Holder hereof costs of
collection, including
reasonable attorneys’ fees.


 


4.6 
Governing Law.
This Note
shall be governed
by and
construed in accordance
with the laws
of the State
of New
York without
regard to
principles of
conflicts of
laws. Any
action brought
by either
party against the other
concerning the transactions
contemplated by
this




    	17



    	 



    

Note
shall be
brought only
in the state
courts of New
York or in
the federal
courts located
in the state
and county of
Nassau. The
parties to this
Note hereby
irrevocably waive any
objection to jurisdiction
and venue
of any action
instituted hereunder
and shall
not assert
any defense based on
lack of
jurisdiction or venue
or based
upon forum non
conveniens.
The Borrower
and Holder waive
trial by jury.
The prevailing party shall
be entitled to
recover from the other party
its reasonable attorney's fees and
costs. In the event that any provision of this Note
or any other agreement delivered
in connection herewith is invalid
or unenforceable under any applicable
statute or rule
of law, then
such provision
shall be
deemed inoperative
to the extent that
it may conflict
therewith and
shall be deemed modified
to conform with
such statute or rule of
law. Any such
provision which may prove invalid or unenforceable
under any law shall
not affect the validity or
enforceability of any
other provision
of any agreement.
Each party hereby irrevocably
waives personal service of
process and consents to process
being served in any
suit, action or proceeding
in connection with this Agreement
or any other Transaction Document
by mailing
a copy thereof via registered or
certified mail or overnight
delivery (with evidence of delivery)
to such
party at
the address
in effect
for notices
to it under
this Agreement and agrees
that such service shall
constitute good and sufficient
service of process and notice
thereof. Nothing
contained herein
shall be
deemed to
limit in
any way any
right to
serve process
in any other manner permitted by
law.


 


4.7 
Certain Amounts.
Whenever pursuant
to this Note
the Borrower
is required to
pay an
amount in
excess of
the outstanding
principal amount
(or the portion
thereof required
to be paid
at that
time) plus
accrued and
unpaid interest
plus Default
Interest on
such interest,
the Borrower and
the Holder agree that the actual
damages to the Holder from the
receipt of cash payment
on this Note may be difficult
to determine and the amount
to be so paid by the Borrower
represents stipulated damages
and not a penalty and is intended
to compensate the Holder in
part for loss
of the opportunity to convert
this Note and
to earn
a return from
the sale of shares of Common
Stock acquired upon conversion
of this Note at a price in excess
of the price paid for
such shares pursuant to this Note.
The Borrower and
the Holder hereby agree that
such amount of stipulated damages
is not plainly disproportionate to the possible loss to the Holder
from the receipt of a cash payment
without the opportunity to convert this Note
into shares of Common Stock.


 


4.8 
Purchase Agreement.
By its acceptance
of this Note,
each party
agrees to
be bound by
the applicable terms of
the Purchase Agreement.


 


4.9 
Notice of
Corporate Events.
Except as
otherwise provided
below, the
Holder of this
Note shall
have no
rights as
a Holder
of Common
Stock unless
and only to the
extent that
it converts
this Note
into Common
Stock. The
Borrower shall
provide the
Holder with
prior notification of any meeting of
the Borrower’s shareholders (and
copies of proxy materials and
other information sent to shareholders).
In the event of any taking
by the Borrower of a record of
its shareholders for the purpose
of determining shareholders who
are entitled to receive payment
of any dividend
or other distribution, any
right to subscribe for, purchase
or otherwise acquire
(including by way of merger, consolidation,
reclassification or recapitalization)
any share of any class or
any other securities or
property, or to receive
any other right,
or for
the purpose
of determining shareholders
who are entitled
to vote in connection
with any
proposed sale, lease
or conveyance of all
or substantially all of the assets
of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower,
the Borrower shall mail
a notice to the Holder, at




    	18



    	 



    

least
twenty (20)
days prior to
the record
date specified
therein (or
thirty (30)
days prior
to the consummation
of the transaction
or event,
whichever is
earlier), of
the date on
which any
such record
is to be
taken for
the purpose
of such
dividend, distribution,
right or
other event,
and a brief
statement regarding the amount
and character of such
dividend, distribution,
right or other event
to the extent known at such
time. The Borrower shall
make a public announcement of
any event requiring
notification to the Holder
hereunder substantially simultaneously with
the notification to the Holder
in accordance with
the terms of this Section
4.9.


 


4.10         
Remedies. The
Borrower acknowledges
that a
breach by
it of its
obligations hereunder
will cause
irreparable harm
to the Holder,
by vitiating
the intent
and purpose of the transaction
contemplated hereby. Accordingly,
the Borrower acknowledges that
the remedy at
law for
a breach
of its obligations
under this Note
will be inadequate
and agrees,
in the event of
a breach or threatened
breach by the Borrower
of the
provisions of this Note, that
the Holder shall
be entitled,
in addition
to all
other available
remedies at
law or in
equity, and
in addition to the penalties
assessable herein, to an
injunction or injunctions restraining,
preventing or curing any breach
of this Note and
to enforce specifically the terms
and provisions
thereof, without
the necessity
of showing economic
loss and
without any
bond or other
security being required.


 


 


IN
WITNESS
WHEREOF,
Borrower
has caused
this Note
to be signed
in its name
by its duly
authorized officer this March
11, 2014.


 


RICH
PHARMACEUTICALS, INC.


 


By:
/s/ Ben Chang


BEN
CHANG


Chief
Executive Officer




    	19



    	 



    

EXHIBIT
A --
NOTICE OF CONVERSION


 


The
undersigned hereby
elects to
convert $principal
amount of the
Note (defined
below) into that
number of shares
of Common Stock
to be issued
pursuant to the
conversion of
the Note
(“Common Stock”)
as set
forth below,
of RICH
PHARMACEUTICALS, INC.,
a Nevada corporation (the
“Borrower”) according to the conditions
of the convertible note of the Borrower
dated as of March 11, 2014 (the
“Note”), as of the date
written below. No fee will be
charged to the Holder for any conversion,
except for transfer taxes, if any.


 


Box
Checked as to applicable
instructions:


 


[
]  The
Borrower shall
electronically transmit the
Common Stock
issuable pursuant
to this Notice
of Conversion
to the account
of the undersigned
or its nominee
with DTC
through its
Deposit Withdrawal
Agent Commission system
(“DWAC Transfer”).


 


Name
of DTC Prime
Broker: Account Number:


 


[
] The
undersigned hereby
requests that
the Borrower
issue a certificate
 or
certificates for
the number
of shares
of Common
Stock set
forth below
(which numbers
are based
on the Holder’s
calculation attached
hereto) in
the name(s) specified
immediately below or, if additional
space is necessary, on an
attachment hereto:


 


ASHER
ENTERPRISES, INC.


1
Linden Pl., Suite 207
Great Neck, NY, 11021


Attention:
Certificate Delivery (516)
498-9890


 


Date
of Conversion:


Applicable
Conversion Price:$__________


Number
of Shares of
Common Stock to be Issued


Pursuant
to Conversion of
the Notes:


Amount
of Principal Balance
Due remaining Under the
Note after this conversion: 


 


ASHER
ENTERPRISES, INC.


 


By:


Name:
Curt Kramer


Title:
 President


Date:
1 Linden
Pl., Suite 207 Great
Neck, NY, 11021



    	20