Exhibit 10.1
 
 
Exhibit 10.1
 
INTEREST PURCHASE AGREEMENT
 
This Interest Purchase Agreement (this “Agreement”) is entered into as of
January 24, 2014 (“Effective Date”), by and among, on the one hand, Wise Phoenix
LLC, a Nevada limited liability company (“WP”), AJOA Holdings, LLC, a Nevada
limited liability company (“AJOA”) (WP and AJOA are collectively referred to as
the “Sellers”), and CEN Biotech Inc. a Canadian registered corporation
(“Company”) and, on the other hand, Organic Growth International, a Nevada
limited liability company (“Investor”).  Capitalized terms used in this
Agreement but not defined in this Agreement shall have the meaning assigned in
the Shareholder Agreement (as defined below).
 
BACKGROUND
 
A.           The Company is a corporation company duly formed and validly
existing under the laws and regulations of Canada.
 
B.           Investor is a joint venture company, co-owned with GrowLife, Inc.
(OTCBB: PHOT), with a wide range of products and expertise in hydroponics and
other controlled environmental and growing systems tailored for the legal
cannabis industry;
 
 
C.           The Sellers own in the aggregate no less than 75% of the fully
diluted equity of the Company outstanding on the date hereof and wishes to sell
to Investor in the aggregate no less than 25% of the fully diluted equity of the
Company outstanding on the date hereof (the “Interests”), which when transferred
to Investor at Closing would reduce Sellers’ aggregate equity to no less than
50% of the of the fully diluted equity of the Company outstanding on the date
hereof.
 
D.           The Sellers, Company and Investor wish to enter into a Shareholder
Agreement in the form of Exhibit A, a Master Equipment, Procurement and Services
Agreement in the form of Exhibit B hereto (the “Equipment Agreement”), an
Information Rights Agreement in the form of Exhibit C hereto, an Profit Sharing
Rights Agreement in the form of Exhibit D hereto, and Schedules 5.6, 5.14, 5.16
(the aforementioned and together with this Agreement and specified required
documents for the Closing (which cannot be waived and are the responsibility of
Seller to deliver), are collectively referred to as the “Transaction
Documents”).
 
1.
Subscription for the Interests.  Sellers hereby agree to the sale of the
Interests and the Purchase Price and Investor hereby agrees to subscribe for the
Interests in accordance with but subject to the terms and provisions set forth
herein.  Sellers and Investor understand that the terms and conditions of the
Interests shall be as described herein this Agreement and in the Shareholder
Agreement.

 
2.
Payment for the Interests.  Subject to the terms and provisions set forth
herein, Investor hereby agrees to tender to Sellers, as the purchase price for
the Interests, the amount of Forty Million United States Dollars (US$40,000,000)
of Growlife Inc. (OTBB: PHOT) (“Growlife”) common stock at a per share price of
$.17 per share (“Payment Shares” or “Purchase Price”). The Payment Shares is
subject to the Issuance Conditions (as

 

 
 

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hereinafter defined 8.1.ii.3) will be registered by the Investor at its sole
cost and expense.  The Company shall utilize its best efforts to effect the
registration of the Payment Shares as quickly as possible under applicable state
and federal securities laws.  Certain individuals of the principals shall
provide consulting services to Growlife and Growlife shall have the obligation
to issue S8 registered shares, upon acceptance of the terms by those certain
individuals named by Wise Phoenix LLC and AJOA Holdings, LLC.  The Closing shall
take place at the offices of Growlife, located at 20301 Ventura Blvd. Suite 126
Woodland Hills, Ca. 91364, Los Angeles, California, or at such other time and
place as the Company and Investor agree.  The Investor shall have the right to
rescind the Closing if the documentation deliverables and attachments, as
specified and required by this Agreement, from Sellers and Company, have not
been delivered to Investor within sixty (60) business days after the date
hereof.

 
3.
Affirmative Covenants.

 
3.1           Personnel Decisions. Seller and Investor shall mutually select the
Chief Financial Officer and legal counsel of the Company so long as the Seller
and the Investor or their respective assignees are shareholders/members of the
Company.
 
3.2            Preferential Return. The allocation of all Distributed Income of
the Company (as hereinafter defined) shall be 60% to Investor, 20% to AJOA and
20% to Wise Phoenix until distribution of the Purchase Price (plus any
undistributed Return on Capital) (as hereinafter defined) to the Investor;
thereafter, Distributed Income shall be allocated 40% to Investor, 30% to AJOA
and 30% to Wise Phoenix. Distributed Income shall be the net income of the
Company, after adding noncash expenses (within the meaning of generally accepted
accounting principles) less any reserves, which shall not exceed 20% of gross
revenues, designated by the Company board of directors to be retained for
working capital or other necessary business expenses.
 
3.3            Member Distributions. It is understood that it is the intention
of the Parties to provide at least an annual distribution of cash flow available
from operations to the Company members, which distribution shall occur within 30
days following income tax filing for the previous calendar year.
 
4.
3.4
Security Interest. Company shall grant Investor a first priority security
interest in all of the assets of the Company excluding personal property and
customer (sales) inventory to be sold in the normal course, which shall secure
the obligations of the Company hereunder and shall remain in effect until
Company has distributed the Purchase Price.

 
5.
Representations and Warranties of Investor.  Investor represents and warrants to
the Company, as of the date hereof:

 
5.1
Organization and Authority.  Investor is a limited liability company, duly
organized, validly existing and in good standing under the laws of
Nevada.  Investor has all requisite power and authority to execute and deliver
the Transaction Documents, to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby.  Each of the
Transaction Documents has been duly and validly executed and delivered by
Investor and are legal, valid and binding obligations of Investor enforceable
against it in accordance with their respective terms except as limited by (A)
applicable bankruptcy, insolvency, reorganization, moratorium, arrangement,
fraudulent transfer and other similar laws affecting creditors’ rights generally
and (B) general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.

 
5.2
Securities Law Restrictions.  Investor understands that the Interests have not
been registered under the United States Securities Act of 1933, as amended (the
“Securities Act”), any securities or blue sky laws of any state in the United
States or any other securities laws and, therefore, cannot be resold or
otherwise transferred unless they are registered under the Securities Act and
applicable state securities or blue sky laws or other securities laws or unless
an exemption from such registration requirements is available.  Investor is
aware that the Company is under no obligation to effect any such registration
with respect to the Interests except pursuant to Section 10.4 of the LLC
Agreement or as required by such applicable laws.

 
5.3
Risks of Investment.  Investor has reviewed and understands the risks of, and
other considerations relating to, the Company, the Interests and the
transactions contemplated by the Transaction Documents.  Investor has such
knowledge and experience in financial and business matters that Investor is
capable of evaluating the merits and risks of an investment in the Company, the
Interests and the transactions contemplated by the Transaction Documents and of
making an informed investment decision, and Investor is able to incur a complete
loss of such investment and is able to bear the economic risk of such investment
for an indefinite period of time.

 
5.4
Investment Purposes.  The Interests being subscribed for are for Investor’s own
account, for investment only and not with a view to, or with any intention of, a
distribution or resale thereof, in whole or in part, or the grant of any
participation therein.

 
5.5
Accredited Investor Status or Other Exemption.  Investor is an “accredited
investor” as that term is defined in Regulation D promulgated under the
Securities Act.  Investor understands that the Company is relying upon
Investor’s representations and warranties to determine the application of the
exemption from registration of the offering of the Interests under Regulation D
and/or Section 4(1) of the Securities Act as well as the securities or blue sky
laws of any applicable state in the United States.

 
5.6
Brokers.  No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Investor.

 
6.
Representations and Warranties of the Sellers and Company.  The Sellers and
Company represent and warrant to, and agrees with Investor as follows on and as
of the date hereof:

 
 
 
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6.1
Organization and Qualification; Subsidiaries.  The Sellers and Company are  duly
organized, validly existing and in good standing under the laws of the State of
which they are incorporated as of the Effective Date and has all requisite
corporate power and authority to carry on its business as currently
conducted.  The Sellers and Company are duly qualified to transact business and
is in good standing in each jurisdiction in which they own property or carries
on its business or is required by law to be so qualified or in good
standing.  The Sellers and Company have subsidiaries, which have consented to
the Transaction documents.  The Sellers and Company are each participants in
joint ventures, partnerships or similar arrangements and have all, if any,
consented to the Transaction Documents.

 
6.2
Certificate of Formation and Shareholder Agreement.  The Sellers and Company
have furnished Investor a complete and correct copy of their respective
Certificates of Formation (the “Certificate of Formation”) certified by the
Secretary of State of the State, and/or Canadian Government and/or Province of
which they are incorporated and any other organizational documents of the
Sellers and Company (the “Organizational Documents”) and no other Organizational
Documents are applicable to or binding upon the Sellers and Company.  The
Organizational Documents are in full force and effect as of the Closing.

 
6.3
Capitalization.  The authorized ownership or membership interests of the Sellers
and Company under the Shareholder Agreement consist solely of Interests owned by
the named individuals therein, all of which are uncertificated, representing
prior to the date hereof 100% of the outstanding equity interest of the Sellers
and Company (the “Existing Interests”).  Except for the Interests to be issued
to Investor pursuant to this Agreement, there are no outstanding options,
warrants, agreements or other rights to purchase or otherwise acquire any
Existing Interests in the Sellers and Company, it being understood that the
Shareholder Agreement contemplates that there will be no further issuances of
Interests absent the express prior written consent of Investor. All of the
outstanding Existing Interests are and the Interests to be issued to Investor
will be, when fully paid for in accordance herewith, duly authorized, validly
issued, fully paid and nonassessable and are not subject to preemptive or
similar rights created by law or the Organizational Documents except as set
forth therein, or any other agreement or document to which the Sellers and
Company are  a party or by which it is bound.  Except for the outstanding
Existing Interests, there are no equity securities, membership interests or
similar ownership interests of any class of any Seller and Company equity
security, or any securities exchangeable or convertible into or exercisable for
such equity securities, membership interests or similar ownership interests,
issued, reserved for issuance or outstanding.  Except as set forth in this
Agreement, the other Transaction Documents and the Shareholder Agreement, there
are no subscriptions, options, warrants, equity securities, membership interests
or similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character (contingent or otherwise) to which
the Sellers and Company are  a party or by which it is bound obligating the
Seller and Company to (i) issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any membership interests or similar
ownership interests of the Seller and Company; (ii) grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement; or (iii) provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any entity.

 
 
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6.4
Authority Relative to the Transaction Documents.  The Sellers and Company have
all requisite power and authority to execute and deliver the Transaction
Documents to which it is party, to perform its obligations thereunder and to
consummate the transactions contemplated thereby.  The execution and delivery of
the Transaction Documents by the Sellers and Company and the consummation by the
Sellers and Company of the transactions contemplated thereby have been duly and
validly authorized by all necessary action on the part of the Sellers and
Company, and no other proceedings are necessary to authorize the Transaction
Documents as to the Sellers and Company or to consummate the transactions
contemplated thereby.  Each of the Transaction Documents has been duly and
validly executed and delivered by the Sellers and Company and are legal, valid
and binding obligations of the Sellers and Company, enforceable against it in
accordance with their respective terms except as limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium, arrangement, fraudulent
transfer and other similar laws affecting creditors’ rights generally and
(B) general principles of equity, regardless of whether asserted in a proceeding
in equity or at law.

 
6.5
Business of the Sellers and Company; Books and Records; Liabilities.

 
 
(i)
Since its formation, the Sellers and Company have not engaged in, or attempted
to engage in, any other business activities other than the Business.

 
 
(ii)
The Sellers and Company do not keep books and records with respect to its
Business other than those books and records regarding corporate documentation,
revenues, profits, taxes and liabilities, which are to be delivered to Investor
prior to Closing and which review and approval by Investor are a pre-condition
to the Closing and payment of the Purchase Price, for which a signed receipt by
a certified representative of Sellers, Company and Investor, verifying that the
books and records have been delivered and approved, all of which cannot be
waived. To the knowledge of the Sellers and Company, the Sellers and Company do
not have any material liabilities (absolute, accrued, contingent or otherwise)
other than those liabilities contemplated by the Sellers and Company’s books and
records or otherwise incurred in the normal course of business.

 
 
(iii)
The Sellers and Company are in the business of inventing, formulating, growing,
manufacturing, tracing, dispensing, distributing, selling pharmaceuticals,
supplements and other health products, cannabis, and other agricultural
products, and as its relates to the foregoing, communications, technology and
applications of various kinds and nature without limitation (“Business”). The
Business also includes real property, intellectual property and proprietary
property.

 
6.6
Interested Party Transactions.  Schedule 5.6 sets forth all agreements,
arrangements and understandings under which the Sellers and Company are indebted
or owes obligations in excess of $500,000 in the aggregate to any of its
respective members, managers, officers, employees, agents or Affiliates (except
for amounts due in the ordinary course of business with respect to disclosed
employment arrangements including salaries and bonuses and reimbursement of
ordinary expenses).

 
6.7
Brokers.  No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Seller and Company.

 
 
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6.8
Compliance with Other Instruments.  Neither the execution, delivery or
performance of the Transaction Documents by the Sellers and Company nor the
compliance with its obligations hereunder or thereunder, nor the consummation of
the transactions contemplated hereby or thereby, nor the issuance, sale or
delivery of the Interests in accordance herewith will:

 
 
(i)
violate or constitute a default under any provision of the Certificate of
Formation or any other agreement of any kind and nature of the Sellers and
Company;

 
 
(ii)
to the knowledge of the Sellers and Company, violate or constitute a default
under any judgment, order, writ or decree applicable to the Sellers and Company;

 
 
(iii)
to the knowledge of the Sellers and Company, permit or cause the acceleration of
the maturity of any obligation of the Sellers and Company;

 
 
(iv)
to the knowledge of the Sellers and Company, materially violate or be in
material conflict with, constitute a default under, result in any fees or
payments (including any break fees, termination payments or expense
reimbursements) by the Seller and Company under, or result in the modification,
acceleration or termination of any Material Contracts (as defined below) entered
into with third parties by the Sellers and Company related to the Business; or

 
 
(v)
to the knowledge of the Sellers and Company, materially violate or be in
material conflict with, constitute a default under, permit the termination of
any contract or result in the creation or imposition of any lien, mortgage, deed
of trust, pledge or other encumbrance created by the Sellers and Company
(collectively, “Encumbrances”) upon any property of the Sellers and Company
under any mortgage, indenture, loan agreement, note or any other agreement to
which the Seller and Company are a party or by which the Sellers and Company may
be bound.

 
6.9
Governmental Consents.  No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Entity (as defined
below) in the United States or Canada on the part of the Sellers and Company
(collectively, “Consents”) is required in connection with the execution and
delivery of the Transaction Documents, or the offer, sale or issuance of the
Interests, or the consummation of the other transactions contemplated thereby,
except for the filings under applicable United States federal and state
securities or blue sky laws and other routine filings.

 
6.10
Compliance with Laws.  To the knowledge of the Sellers and Company, the Sellers
and Company have complied with and is not in violation of any applicable United
States federal, California, Nevada and Michigan state laws, and Canadian laws
and regulations (the “Applicable Laws”) except as would not have a material
adverse effect on the Business.

 
 
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6.11
Litigation.  There is no action, suit, proceeding, arbitration, complaint or
investigation pending, or, to the Sellers and Company’s knowledge, threatened
(including cease and desist letters or invitations to take a patent license) (a)
against the Sellers and Company, (b) against or affecting any director, officer,
employee, agent or representative of the Sellers and Company directly or
indirectly relating to the Sellers and Company, or (c) that relate to any of the
Transaction Documents or any of the transactions contemplated by any of the
Transaction Documents.  The foregoing includes, without limitation, actions,
suits, proceedings or investigations pending or, to the Sellers and Company’s
knowledge, threatened in writing involving the prior employment of any of the
Sellers and Company’s employees or their services provided in connection with
the Seller and Company.

 
6.12
Offering.  Based in part in reliance on Investor’s representations and
warranties in Section 4 hereof, the Sellers and Company have  not, either
directly or through any agent, offered any Interests to or solicited any offers
to acquire any Interests from any natural person, corporation, partnership,
limited liability company, association, joint venture, business trust, joint
stock company, trust estate, unincorporated association or other entity of
whatsoever nature (a “Person”) in such a manner as to require the offer or sale
of the Interests to be registered pursuant to the provisions of Section 5 of the
Securities Act or the securities or blue sky laws of any applicable state in the
United States.  Neither the Sellers and Company nor anyone acting on its behalf
will take any action that it believes would cause any such registration to be
required (including, without limitation, any offer, issuance or sale of any
security of the Sellers and Company under circumstances that might require the
integration of such security with the Interests under the Securities Act which
might subject the offering, issuance or sale of the Interests to the
registration provisions of the Securities Act).  Assuming the truth and accuracy
of the Investors’ representation and warranties in Section 4 hereof, the
issuance of the Interests is exempt from registration under the Securities Act.

 
6.13
Insurance.  As a pre-condition to the Closing, which cannot be waived, the
Sellers and Company have made available to Investor copies of all policies of
insurance relating to the Sellers and Company and any notices received by the
Sellers and Company with respect to (i) any claim pending under any insurance
policies, (ii) any coverage question, or coverage denial or coverage dispute by
the underwriters of such policies or bonds, (iii) all premiums due and payable
under all such policies, or (iv) any allegation that the Sellers and Company are
not in material compliance with the terms of such policies.

 
6.14
Risks of Investment.  Sellers and Company each have reviewed and understands the
risks of, and other considerations relating to, the Company, the Purchase Price
and the transactions contemplated by the Transaction Documents.  Sellers and
Company each have such knowledge and experience in financial and business
matters that Sellers and Company are each capable of evaluating the merits and
risks of an investment in the Purchase Price and the transactions contemplated
by the Transaction Documents and of making an informed investment decision, and
Sellers and Company are each able to incur a complete loss of such investment
and is able to bear the economic risk of such investment for an indefinite
period of time.

 
 
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6.15
Investment Purposes.  The Purchase Price being subscribed for are for Sellers
and Company’s own account, for investment only and not with a view to, or with
any intention of, a distribution or resale thereof, in whole or in part, or the
grant of any participation therein.

 
6.16
Accredited Investor Status or Other Exemption.  Sellers and Company are each an
“accredited investor” as that term is defined in Regulation D promulgated under
the Securities Act.  Investor understands that the Company is relying upon
Investor’s representations and warranties to determine the application of the
exemption from registration of the offering of the Interests under Regulation D
and/or Section 4(1) of the Securities Act as well as the securities or blue sky
laws of any applicable state in the United States.

 
6.17
Intellectual Property.

 
(a)           Sellers have transferred, assigned and delivered to the Company
(and Sellers have retained nothing and delivered everything) all patents,
trademarks, domain names, copyrights and other registered or applied for
intellectual property owned, licensed to or otherwise used (prior to the
Effective Date by the Seller, directly or indirectly) by Company for the
Business, all of which are identified in Schedule 5.14 attached hereto.  To the
knowledge of the Sellers and Company, all such listed intellectual property is
valid and in full force and effect and is owned by, is licensed to, or an
application with respect thereto has been filed by or on behalf of the
Company.  None of the intellectual property owned by the Company is being
contested, or challenged by any person, and to the knowledge of the Company, the
conduct of the Business as currently conducted does not infringe, misappropriate
or violate in any material respect the intellectual property rights of any
Person.  The Sellers and Company have not received any written notice alleging
that the Sellers and Company have violated or, by conducting its Business as
currently conducted, would violate any of the patents, trademarks, service
marks, tradenames, copyrights, trade secrets, mask works or other proprietary
rights or processes of any other Person, which violation would have a material
adverse effect on the Business.
 
(b)           The Sellers and Company have taken reasonable actions to protect
and maintain (i) ownership of its material proprietary intellectual property and
(ii) the security, continuous operation and integrity of its material systems
and software (and all data stored therein or transmitted thereby).
 
 
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6.18
Tax.

 
(a)           For purposes of this Agreement the terms below shall have the
following respective meanings:  “Taxes” shall mean all taxes, charges, levies,
penalties or other assessments imposed by any United States federal, state,
local or foreign taxing authority, including, but not limited to income, excise,
property, sales, transfer, franchise, payroll, withholding, social security or
other similar taxes, including any interest or penalties attributable
thereto.  “Tax Return” shall mean any return, report, information return or
other document (including any related or supporting information) required to be
filed with any taxing authority with respect to Taxes, including information
returns, claims for refunds of Taxes and any amendments or supplements to any of
the foregoing.
 
(b)           All Tax Returns required to be filed by, or on behalf of, the
Sellers and Company have been timely filed, and all such Tax Returns were true,
correct and complete in all material respects when filed.  All Taxes of the
Sellers and Company reflected on the Tax Returns referred to in the preceding
sentence have been fully and timely paid. The Sellers and Company have not
requested, or been granted any waiver of any federal, state, local or foreign
statute of limitations with respect to, or any extension of a period for, the
assessment of, any Tax.  There is no action, suit, proceeding, audit or claim
now pending or, to the knowledge of the Sellers and Company, investigation, in
respect of any Tax with respect to the Sellers and Company.  There are no Liens
for any Tax on any assets of the Sellers and Company, except for Taxes not yet
due and payable or being contested in good faith, and there are no unpaid Taxes
that would reasonably be expected to result in such a Lien.  All Taxes required
to be withheld and paid with respect to the Sellers and Company have been paid
or withheld.  As of the Closing Date, the Sellers and Company will not be bound
by any Tax-sharing, Tax indemnity or Tax assumption agreements or similar
arrangements or have any liability thereunder.  At all times since its
inception, the Sellers and Company have been for U.S. federal income tax
purposes either an (i) entity disregarded from its owner or (ii) a partnership
for U.S. federal income tax purposes.
 
6.19
Material Contracts.  (a) Except as set forth in Schedule 5.16(a) and the
Transaction Documents, the Company is not a party to, bound by or subject to any
agreement, arrangement or understanding (whether written or oral) that (i) would
be a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K
if the Company had securities registered under the Securities Exchange Act of
1934, as amended, (ii) purports to limit in any material respect either the type
of business in which the Company may engage or the manner or locations in which
it may so engage in any business, (iii) relates to the incurrence of
indebtedness, endorsement or guarantee of the obligations of a third party in
principal amount of $1,000,000 or more, or (iv) refers to any material license
of any patent, copyright, trademark or other similar proprietary right to or
from the Company (each, a “Material Contract”).

 
(b)  (i)  Each Material Contract to which the Sellers and Company (all of which
are the property of the Company) are a party is valid and binding on the Sellers
and Company, as the case may be, and in full force and effect (other than due to
the ordinary expiration of the term thereof), and, to the knowledge of the
Sellers and Company, are valid and binding on the other parties thereto, (ii)
the Sellers and Company have performed all obligations required to be performed
by it to date under each such Material Contract, and (iii) the Sellers and
Company are not in default under any Material Contracts to which it is a party,
by which it or its assets, business, or operations may be bound or affected, or
under which it or its assets, business, or operations receive benefits, and to
the Seller’s and Company’s knowledge there has not occurred any event that, with
the lapse of time or the giving of notice or both, would constitute such a
default, except in each case as would not have a material adverse effect on the
Company.
 
 
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6.20
Government of Canada, Health Canada Relationship, Letter and Legal Cannabis
Industry.  As of the date of this Agreement, Health Canada, the Ministry of
Health or any other agency with oversight or influence to the legal Canadian
cannabis market, has not canceled or terminated Canada’s relationship or the
Health Canada Letter Agreement (“Letter”) with CEN Biotech Inc. (a material
affiliate of AJOA, Wise Phoenix and Company) or notified any of them (or any of
their respective owners, employees, agents or representatives) of any intention
to do any of the foregoing.  Prior hereto, CEN Biotech Inc. has entered into
that certain Licensing and Services Agreement dated as of November 26th 2013
with the Company, Wise Phoenix, and AJOA (the “CEN Biotech Agreement”). The
Letter, the CEN Biotech Agreement, and all other material correspondences among
the parties and the Canadian government are attached hereto as Schedule 5.16, is
a material to the Investor and Investor’s election to make the investment in the
Company and the matters described hereunder this Agreement.

 
6.21
Financial Statements.  The Sellers and Company will deliver to the Investor its
unaudited or audited, as the case may be, financial statements for the fiscal
years of 2011, 2012 and 2013 (interim financial statements for 2013),
(consisting of a balance sheet, income statement and statement of cash flows)
(collectively, the “Financial Statements”).  The Financial Statements have been
prepared in accordance with generally accepted accounting principles other than
as to any year-end adjustments and notes thereto.  Subject to the foregoing, the
Financial Statements fairly present in all material respects the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein. The aforementioned deliverables cannot be waived and
is a prerequisite to Closing.

 
7.
[Reserved]

 
8.
Closing Deliveries.

 
8.1
Deliveries of Investor.  At the Closing, Investor shall deliver, or shall cause
to be delivered, to the Sellers, or at the Sellers’ direction the following:

 
 
(i)
The Transaction Documents duly executed by Investor; and

 
 
(ii)
The Purchase Price shall be issued upon the occurrence of the Issuance Condition
(as hereinafter defined 8.1.iii) as follows:

 
 
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8.1.ii.1                       Buyer, or its designated Transfer Agent, shall
deliver to Wise Phoenix, LLC, One Hundred Seventeen Million Six Hundred Forty
Seven Thousand Fifty Nine (117,647,059) of the Growlife Shares (equivalent to ½
of the U.S. $40,000,000 Purchase Price) (“Wise Phoenix Shares”); and
 
 
8.1.ii.2                       Buyer, or its designated Transfer Agent, shall
deliver to AJOA Holdings, LLC, One Hundred Seventeen Million Six Hundred Forty
Seven Thousand Fifty Nine (117,647,059) of the Growlife Shares (equivalent to ½
of the U.S. $40,000,000 Purchase Price) (“AJOA Shares”).

8.1.ii.3                     Issuance Condition.  In addition to all of the
documentary deliverable requirements contained under this Agreement, which the
issuance of the Payment Shares are expressly subject to the satisfactory
acceptance of Investor, in his sole discretion, additionally, such issuance of
the Payment Shares are also expressly subject to Investor’s receipt of
documentary evidence, satisfactory to Investor, in his sole discretion, that a
Canadian governmental agency (e.g. Health Canada, Canadian Ministry of Health,
etc.), the Minister of Health, or other person acting upon authority under the
laws and regulations of the Country of Canada, has by contract, license or
otherwise, granted specific rights to Seller, R.X.N.B. Inc., or CEN Biotech
Inc., to produce, grow, harvest, package, sell, import and export, cannabis and
cannabis products and bi-products, directly or indirectly, to sanctioned
importers, exporters, distributors and/or end users of not less than 1.3 million
pounds (“Minimum Volume Amount”) (collectively the “Issuance Condition”). Once
the Issuance Condition is approved and verified by Investor, Growlife will be
obligated to issue the Wise Phoenix Shares and the AJOA Shares. In the event
that the Minimum Volume Amount is less, then the Investor shall have the right
to rescind this Agreement or reduce the Payment Shares proportionately compared
to the Minimum Volume Amount shortfall.
 
8.2
Deliveries of the Seller and Company.  Upon the Closing, the Seller shall cause
the Company and Company shall deliver, or shall cause to be delivered, to
Investor and any other applicable parties, the following:

 
 
(i)
The Interests (“25% Shares of BioTech Inc.”), provided that the Interests will
be vested immediately upon the Effective Date without receiving the Interests
certificates, and the physical certificates will be issued within 5 days from
the Effective Date;

 
 
(i)
Issuance Condition (e.g. the/any prerequisite deliverables specified in this
Agreement that are a condition to Closing, including without limitation, Any
prerequisite documentary, technology, property, security or any other
deliverables specified in this Agreement that are a condition to Closing (or
that may be delivered within 60 days after) and cannot be waived; and

 
 
(ii)
The Transaction Documents, Schedules and Exhibits, duly executed by the Sellers
and Company and any other required parties; and

 
 
(iii)
A certificate of legal existence and corporate good standing in respect of the
Sellers and Company and issued by the office of the Secretary of State of the
State they are incorporated.

 
 
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2.
Indemnification.

 
2.1
Indemnification by the Seller and Company.  Subject to the limitations set forth
in Section 8.2, the Sellers and Company shall indemnify, defend and hold
harmless Investor and its Affiliates and their respective officers, directors,
employees, agents, successors and assigns (collectively, the “Investor
Indemnified Parties”) promptly upon demand at any time and from time to time,
from and against any and all liabilities, out-of-pocket losses, damages, claims,
suits, actions or causes of action, assessments, fines, costs and expenses,
interest, awards, settlements, judgments and penalties actually suffered or
incurred (each, a “Loss”) to any Investor Indemnified Party arising out of or
resulting from: (i) the breach of, or inaccuracy in, any representation or
warranty made by the Company in this Agreement and (ii) the successful
enforcement of the indemnification obligation contained in this Section
8.1.  For purposes of calculating the amount of any Losses subject to
indemnification pursuant to this Section 8 and for determining if any breach of
this Agreement has occurred, all references to materiality, material adverse
effect and similar terms shall be disregarded.

 
2.2
Further Provisions Regarding Indemnification.

 
 
(i)
Survival.  All representations, warranties, covenants and agreements made by the
Sellers and Company or by Investor in this Agreement shall survive shall survive
indefinitely.

 
 
(ii)
Third Party Claims.  The Sellers or Company shall have the right to assume and
control the defense of such actions, suits, claims and proceedings for which
indemnification is sought pursuant to this Section 8.2.  The Company shall not,
without the prior written consent of the Investor Indemnified Party which will
not be unreasonably withheld, delayed or conditioned, (A) settle or compromise
any claim or proceeding or consent to the entry of any judgment which does not
include as an unconditional term thereof the delivery by the claimant or
plaintiff to the Investor Indemnified Party of a written release from all
liability in respect of such claim or proceeding or (B) settle or compromise any
action, suit, claim or proceeding in any manner that materially and adversely
affects the Investor Indemnified Party other than as a result of money damages
or other monetary payments that are indemnified hereunder.  The Investor
Indemnified Parties shall not settle or compromise any action, suit, claim or
proceeding without the written consent of the Company, which consent shall not
be unreasonably withheld, delayed or conditioned.

 
 
(iii)
Participation in Defense.  The Investor Indemnified Party may in any event
participate in any defense with its own counsel and at the reasonable expense of
the Company, and the Investor Indemnified Party shall be kept reasonably
informed by the Sellers and Company of such action, suit, claim or proceeding at
all stages thereof, whether or not it is represented by
counsel.  Notwithstanding the foregoing, if (A) there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate in the
reasonable judgment of counsel for the Investor Indemnified Party for the same
counsel to represent both the Investor Indemnified Party and the Company, (B)
such claim or proceeding does not solely seek monetary relief, or (C) the
Company does not conduct the defense of such action, suit, claim or proceeding
actively and diligently, then the Investor Indemnified Party shall be entitled
to retain its own counsel, at the expense of the Company with respect thereto.

 
 
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(iv)
Information and Assistance.  Except as limited by applicable privilege issues,
the Sellers, Company and the indemnified party shall make available to each
other Party and its attorneys and accountants all witnesses, books, records
materials, and information in the Company’s possession or under its control
relating to any action, suit, claim or proceeding described in Section 8.2(iii),
and the parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit, claim or proceeding.

 
3.
[Reserved]

 
4.
Legends

 
4.1
Restrictive Securities Act Legend.  Any certificates representing Interests
shall bear a legend in substantially the following form, in addition to any
other legends required by law or contract (including the Existing LLC
Agreement):

 
“THE LIMITED LIABILITY COMPANY UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), ANY SECURITIES OR BLUE SKY LAWS OF ANY STATE IN THE UNITED STATES OR ANY
OTHER SECURITIES LAWS, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS COVERING THE TRANSFER OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE OF COMPLIANCE WITH THE ACT AND SAID LAW
SATISFACTORY TO THE ISSUER THAT REGISTRATION UNDER SAID ACT AND SAID LAW IS NOT
REQUIRED.”
 
4.2
Termination of Restrictions.  The legends required by this Section 10 shall be
removed by the Company upon reasonable request without charge as to any
particular Interests (i) when, in the opinion of counsel reasonably acceptable
to the Management Committee of the Company, such restrictions are no longer
required in order to assure compliance with the Securities Act and all
applicable state or other securities or blue sky laws or (ii) when such
Interests shall have been registered under the Securities Act or transferred
pursuant to Rule 144 promulgated thereunder.

 
 
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5.
Assignment.  Neither this Agreement nor the rights, interests or other
obligations accruing under this Agreement may be assigned or transferred, in
whole or in part, by operation of law or otherwise, by any party without the
prior written consent of the other party to this Agreement, and any such
assignment without such prior written consent shall be null and void; provided
that Investor may assign all of its rights and obligations under this Agreement
to its designee, transferee or affiliate.

 
6.
Binding.  This Agreement shall be binding upon the respective heirs, executors,
administrators, successors and permitted assigns of Investor, Sellers and the
Company.

 
7.
Governing Law; Jurisdiction.  This Agreement shall be governed by and construed
in accordance with the laws of the State of California, United States, but
without giving effect to any conflict of law provision or rule that would cause
the application of the substantive laws of any other jurisdiction.  Each of the
parties hereto irrevocably and unconditionally submits for itself to the
exclusive jurisdiction (and waives any objection to the venue) of any United
States federal court or state court sitting in the County of Los Angeles, State
of California, United States, and any appellate court therefrom, in any suit,
action arising out of relating to this Agreement and the transactions
contemplated hereby.

 
8.
WAIVER OF JURY TRIAL.  TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAWS WHICH
CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT
IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF
ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT
OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.  ANY OF THE PARTIES HERETO
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 14 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF
HIS OR ITS RIGHT TO TRIAL BY JURY.

 
9.
Reliance.  Each of the parties hereto acknowledges that it has been informed by
each other party that the provisions of Sections 13 and 14 and this Section 15
constitute a material inducement upon which such party is relying and will rely
in entering into this Agreement and the transactions contemplated hereby.

 
10.
Entire Agreement; Modification; Waiver; Amendment.  The Transaction Documents
and the other agreements contemplated hereby or thereby constitute the full and
entire understanding of the parties hereto regarding the subject matter hereof
and thereof and supersede all prior or contemporaneous agreements, documents,
understanding or arrangements regarding the subject matter hereof and
thereof.  Any amendment, modification or waiver of this Agreement or any
provision hereof must be in writing executed by the parties hereto.

 
 
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11.
Notices.  All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given (i) upon personal delivery, (ii) the next
business day after the business day timely delivered to a recognized overnight
courier or (iii) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid and properly addressed to the
party to be notified as set forth on the signature page hereof or at such other
address as such party may designate by ten (10) days advance written notice to
the other party hereto.

 
12.
Expenses.  Each party shall be responsible for their own costs, fees and
expenses incurred with the examination, review, negotiation, execution, delivery
and performance of this Agreement and the agreements contemplated hereby
(including the other Transaction Documents) and the transactions contemplated
hereby and thereby.

 
13.
Publicity; Press Releases.  Each of the parties to this Agreement hereby agrees
with the other party hereto that no press release or similar public announcement
or communication shall be made or be caused to be made, prior to, or, as the
case may be after the Closing concerning the execution or performance of this
Agreement unless the other party shall have provided its prior written consent,
not to be unreasonably withheld.  Notwithstanding the foregoing, either party
may make or cause to be made any press release or similar public announcement or
communication as may be required to comply with the requirements of any
Applicable Laws; provided, that, to the extent in the good faith judgment of
such party it is reasonably practicable to do so, such party must (i) provide
the other party with an opportunity to review such party’s intended
communication and (ii) consider in good faith modifications to the intended
communication that are requested by the other party. To further the parties’
intent to publicize the relationship created by the Transaction Documents, the
parties agree to only issue a mutually agreed upon press release announcing the
relationship.  THE PARTIES EACH ACKNOWLEDGE THAT A INFORMATION THAT MAY BE
RELEASED TO THE PUBLIC AND PRESS MAY BE DETRIMENTAL TO EACH OF THE PARTIES.  IN
SO FAR AS A PUBLIC OR PRESS RELEASE IS MADE WITHOUT THE EXPRESS PRIOR WRITTEN
CONSENT OF THE NON-RELEASING PARTIES, THE RELEASING PARTIES WILL PAY ANY DAMAGES
AND COSTS RELATED TO THE UNAUTHORIZED RELEASE.

 
14.
Severability.  If any term, provisions, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions completed by this Agreement is
not affected in any manner materially adverse to any party. Upon such
determination, the parties shall negotiate in good faith to modify this
Agreement so as to affect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated by
this Agreement and the other Transaction Documents be consummated as originally
contemplated to the fullest extent possible.

 

 
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IN WITNESS WHEREOF, the undersigned has executed this BioTech Inc., Interest
Purchase Agreement.
 
GrowLife Inc,
Wise Phoenix LLC
       
By: _________________________
By: ________________________
   
Its: _________________________
Its: ________________________
   
Date: _________________________
 Date: ________________________
   
R.X.N.B. Inc.
 AJOA Holdings, LLC
   
By: _________________________
 By: ________________________
   
Its: _________________________
Its: ________________________
   
Date: _________________________
 Date: ________________________
           
Organic Growth International LLC
  CEN Biotech Inc.
   
By: _________________________
    By: ________________________
   
Its: _________________________
   Its: ________________________
   
Date: _________________________
   Date: ________________________
       
CANX USA LLC
     
By: _________________________
     
Its: _________________________
     
Date: _________________________
     

 
 
 
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