Exhibit 10.13
 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (I) PURSUANT TO
REGISTRATION UNDER THE ACT AND/OR APPLICABLE STATE SECURITIES LAWS OR (II) IN
COMPLIANCE WITH AN EXEMPTION THEREFROM AND ACCOMPANIED, IF REQUESTED BY THE
COMPANY, WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH AN EXEMPTION THEREFROM.

PHOTOTRON HOLDINGS, INC.
 
SENIOR SECURED PROMISSORY NOTE
 

 

PRINCIPAL AMOUNT:  $349,790.68 October 12, 2011

 
 
 
FOR VALUE RECEIVED, the undersigned, Phototron Holdings, Inc., a Delaware
corporation (the “Company”), promises to pay to the order of W-Net Fund I, L.P.,
or its registered assigns (the “Holder”), the Principal Amount specified above
plus simple interest at a fixed rate equal to twelve percent (12%) per
annum.  The Principal Amount specified above includes outstanding principal and
interest under that certain Senior Secured Promissory Note issued by the Company
to the Holder on August 23, 2011 (the “Existing Note”), which indebtedness has
been converted into this Senior Secured Promissory Note (this “Note”).  The
Company and the Holder hereby agree that the Existing Note is hereby terminated
and shall have no further force and effect.  Interest shall be calculated on the
basis of actual number of days elapsed over a year of 365 days and shall accrue
from the date of this Note.  Notwithstanding any other provision of this Note,
the Holder does not intend to charge and the Company shall not be required to
pay any interest or other fees or charges in excess of the maximum permitted by
applicable law; any payments in excess of such maximum shall be refunded to the
Company or credited to reduce principal hereunder.  All payments (including
prepayments) received by the Holder will be applied first to costs of
collection, if any, then to interest and the balance to principal.
 
This Note is issued as part of a series of notes (collectively, the “Notes”) to
the persons and entities listed on the Schedule of Purchasers attached hereto as
Exhibit A (collectively, the “Holders”).  As additional consideration for the
purchase of this Note, the Holder will receive a Common Stock Purchase Warrant
in substantially the form attached hereto as Exhibit B, to purchase that number
of shares of the Company’s common stock, par value $0.0001 per share, determined
by dividing fifty percent (50%) of Principal Amount by $0.10, exercisable for a
period of five (5) years, at an exercise price of $0.10 per share.
 
 
 

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The Company’s obligations under this Note are secured by a security agreement
dated as of October 12, 2011 (the “Security Agreement”) and executed by the
Company for the benefit of the Holder.  Additional rights of the Holder are set
forth in the Security Agreement.
 
The following is a statement of the rights of the Holder and the conditions to
which this Note is subject and to which the Holder, by the acceptance of this
Note, agrees:
 
1.           Payment of Principal and Interest.  The outstanding principal
balance and accrued interest on this Note shall be due and payable on the
earliest to occur of (the “Maturity Date”): (i) any liquidation, dissolution, or
winding up of the Company, whether voluntary or involuntary; (ii) any (a) merger
or consolidation of the Company with or into any other entity or entities in
which the stockholders of the Company do not own, directly or indirectly, more
than 50% of the outstanding voting power of the surviving entity (assuming
conversion and/or exercise of all issued and outstanding options, warrants and
other convertible securities), (b) sale, transfer or other disposition of all or
substantially all of the assets of the Company, (c) closing of a transfer
(whether by merger, consolidation or otherwise), in one transaction or a series
of related transactions, to a person or group of affiliated persons (other than
an underwriter of the Company’s securities), of the Company’s then-outstanding
securities if, after such closing, such person or group of affiliated persons
would hold more than 50% of the outstanding voting stock of the Company, and (d)
an initial public offering; and (iii) August 22, 2012.  Payments of principal
and interest will be made by check or wire transfer of immediately available
United States funds sent to the Holder at the address or wire transfer
instructions furnished to the Company for that purpose.  The Notes shall rank
equally without preference or priority of any kind over one another, and all
payments (including any prepayment) on account of principal and interest with
respect to any of the Notes shall be applied ratably and proportionately on the
outstanding Notes on the basis of the principal amount of the outstanding
indebtedness represented thereby and shall be made pro rata among all Holders on
the basis of the principal amount of the outstanding indebtedness represented by
all of the Notes.
 
1.1.          Payment Schedule.
 
1.1.1          On the Maturity Date, the Company shall pay to the Holder the
outstanding principal amount, all accrued but unpaid interest thereon and all
other amounts owing to the Holder in respect of this Note.
 
1.1.2          Upon the payment in full of all amounts due and owing under this
Note, the Holder shall promptly surrender this Note to or as directed by the
Company.
 
1.2.          Prepayment.  Notwithstanding the foregoing, the Company may prepay
this Note at any time prior to the Maturity Date without penalty.  All such
amounts paid toward the satisfaction of this Note shall be applied first to the
payment of accrued and unpaid interest and other amounts owing to the Holder in
respect of this Note and then to the retirement of principal.
 
 
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2.            Events of Default.  Holders holding a majority in interest of the
aggregate outstanding principal amount of the Notes (the “Requisite Holders”)
may declare the entire unpaid principal and accrued interest on the Notes to be
immediately due and payable, by a notice in writing to the Company, and from the
time of the Company’s receipt of such written notice until this Note shall be
paid in full, the unpaid outstanding principal balance of this Note shall bear
interest at the rate of fifteen percent (15%) per annum (calculated on the basis
of a three hundred sixty-five (365) day year for the actual number of days
elapsed), compounded annually, if any of the following events shall occur (each
an “Event of Default”):
 
2.1.           Default in the payment of principal of the Notes or accrued
interest thereon when due, which default shall not have been cured within
fifteen (15) days of notice thereof from any Holder to the Company, subject to
Section 4; or
 
2.2.           Breach by the Company of any material provisions of any agreement
between the Company and any of the Holders; or
 
2.3.           The institution by the Company of a case under any chapter of
Title 11 of the United States Code, as amended (the “Bankruptcy Code”) or any
proceedings to be adjudicated insolvent, or the consent by the Company to an
order of relief concerning the Company in a case under any chapter of the
Bankruptcy Code or any other insolvency proceedings against the Company under
any federal or state law, or the consent by the Company to or acquiescence in
the filing of any petition relating thereto, or the appointment of a receiver,
liquidator, assignee, trustee or other similar official of the Company, or of
any substantial part of its property, or the making by the Company of an
assignment for the benefit of creditors, or the admission by the Company in
writing of its inability to pay its debts generally as such debts become due; or
 
2.4.           Commencement of proceedings against the Company under any chapter
of the Bankruptcy Code or seeking liquidation, dissolution or similar relief
against the Company under any present or future statute, law or regulations
which proceedings shall not have been dismissed or stayed within thirty (30)
days of commencement thereof, or the setting aside of any such stay of any such
proceedings, or the appointment without the consent or acquiescence of the
equity holders of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial portion of the properties of the Company
which appointment shall not have been vacated within thirty (30) days thereof.
 
3.             Waiver of Notice; Fees.  The Company hereby waives notice,
presentment, protest and notice of dishonor.  Other than pursuant to a writing
by the Holder, no failure to exercise any right of the Holder with respect to
this Note, nor any delay in, or waiver of, the exercise thereof, shall impair
any such right or be deemed to be a waiver thereof.  If the Holder is required
to commence legal proceedings or incur any other cost to collect amounts due and
payable hereunder or to enforce its rights under this Note, the Company shall be
liable to pay or reimburse the Holder for all reasonable costs and expenses
incurred in connection with the collection of such amounts and any such legal
proceedings, including without limitation attorneys’ fees.
 
 
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4.             Transfer of this Note.  With respect to any offer, sale or other
disposition of this Note, the Holder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of the Holder’s counsel to the effect that such offer, sale or other
distribution may be effected without registration or qualification (under any
federal or state law then in effect).  Upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify the Holder that the Holder may sell or otherwise
dispose of this Note or such securities, all in accordance with the terms of the
notice delivered to the Company.  Each Note thus transferred shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the opinion of counsel for the Company such
legend is not required.  The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
 
5.             Prepayment.  The Company may prepay this Note at any time.
 
6.             Representations and Warranties.  In connection with the
transactions provided for herein:
 
6.1.           Company.  The Company hereby represents and warrants to the
Holder that all corporate action on the part of the Company necessary for the
authorization, execution and delivery of this Note by the Company and the
performance of the Company’s obligations hereunder has been taken.  This Note,
when executed and delivered by the Company, shall constitute a valid and binding
obligation of the Company enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors.
 
6.2.           Holder.  The Holder hereby represents and warrants to the Company
that the Holder is an accredited investor within the meaning of Regulation D
prescribed by the Securities and Exchange Commission pursuant to the Act, is
acquiring this Note for the Holder’s own account and not with a view to, or for
resale in connection with, any distribution thereof, and has received all
information the Holder considers necessary or appropriate for deciding whether
to acquire the Securities.
 
7.             Miscellaneous.
 
7.1.           Successors and Assigns.  Subject to the exceptions specifically
set forth in this Note, the terms and conditions of this Note shall inure to the
benefit of and be binding upon the respective executors, administrators, heirs,
successors and assigns of the parties, provided, however, that principal and
interest are payable hereunder only to the registered Holder of this Note.
 
7.2.           Loss or Mutilation of Note.  Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, together with indemnity reasonably satisfactory to the
Company, in the case of loss, theft or destruction, or the surrender and
cancellation of this Note, in the case of mutilation, the Company shall execute
and deliver to Holder a new Note of like tenor and denomination as this Note.
 
7.3.           Titles and Subtitles.  The titles and subtitles of the sections
of this Note are used for convenience only and shall not be considered in
construing or interpreting this Note.
 
 
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7.4.           Notices.  All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex, electronic mail or
facsimile if sent during normal business hours of the recipient, and if not,
then on the next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.  All
communications shall be sent:
 
If to the Company, to:
20259 Ventura Boulevard

Woodland Hills, CA 91364
Attn: Chief Executive Officer
E-mail: doug@growlifeinc.com
Facsimile: (818) 992-0202
 
If to the Holder, to:
12400 Ventura Boulevard, Suite 327

Studio City, CA 91604
Attn: Chief Executive Officer
E-mail: dweiner@w-net.com
Facsimile: (818) 474-7589
 
or at such other address, e-mail address or facsimile number as the Company or
the Holder may designate by ten (10) days advance written notice.
 
7.5.           Note Holder Not Stockholder.  This Note does not confer upon the
Holder any right to vote or to consent to or to receive notice as a stockholder
of the Company, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a stockholder.
 
7.6.           Governing Law.  The terms of this Note shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California, without giving effect to conflicts of laws principles.
 
7.7.           Waiver and Amendment.  Any term of this Note may be amended,
waived or modified with the written consent of the Company and the Holder;
provided, that if such amendment is to be made to all the Notes and affects all
Holders of the Notes equally (except for such differences as arise solely from
the differing principal amounts of such Notes), then the Holder agrees with the
Company that such amendment may be effected upon the written consent of the
Requisite Holders.  Any amendment, waiver or modification of the Notes in
accordance with this Section 7.7 shall be binding on the holders of all Notes.
 
[SIGNATURE PAGE FOLLOWS]
 
 
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IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name as
of the date first above written.

  PHOTOTRON HOLDINGS, INC.          
 
By:
/s/   Brian B. Sagheb
      Brian Sagheb       Chief Executive Officer  

 

ACKNOWLEDGED:             W-NET FUND I, L.P.    
 
    By: W-Net Fund GP I, LLC     Its: General Partner                  
By:
/s/ David Weiner      
David Weiner
     
Manager
   

 
 

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EXHIBIT A

SCHEDULE OF PURCHASERS

HOLDER
 
ISSUANCE DATE
PRINCIPAL AMOUNT
Europa International, Inc.
October 8, 2011
$100,000.00
W-Net Fund I, L.P.
October 12, 2011
$349,790.68

 
 

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EXHIBIT B

FORM OF COMMON STOCK PURCHASE WARRANT