Exhibit 10.2
DEBT PURCHASE AGREEMENT
 
 
THIS DEBT PURCHASE AGREEMENT (this “Agreement”), is made and entered into as of
the 15th day of August 2016, by and among TCA GLOBAL CREDIT MASTER FUND, LP, a
Cayman Islands limited partnership, with an address of 3960 Howard Hughes
Parkway, Suite 500, Las Vegas, NV 89169 (“Assignor” or “Lender”), CHICAGO
VENTURE PARTNERS, L.P., a Utah limited partnership (“Assignee”), and GROWLIFE,
INC., a Delaware corporation (the “Borrower”).
 
W I T N E S S E T H
 
WHEREAS, Borrower, Lender and others entered into, or are otherwise parties to
and bound by, the terms of that certain Securities Purchase Agreement, dated as
of April 30, 2015, but made effective as of July 9, 2015 (the “Original Purchase
Agreement”), pursuant to which the Borrower executed and delivered that certain
Senior Secured, Convertible, Redeemable, Debenture, dated as of April 30, 2015
but made effective as of July 9, 2015, in the original principal amount of
$700,000 (the “Original Debenture”);
 
WHEREAS, Borrower, Lender and others entered into, or are otherwise parties to
and bound by, the terms of that certain Securities Purchase Agreement, dated as
of April 30, 2015, but made effective as of August 6, 2015 and made effective as
of October 27, 2015 (the “Supplemental Purchase Agreement”), pursuant to which
the Borrower executed and delivered that certain Senior Secured, Convertible,
Redeemable, Debenture, dated as of April 30, 2015 but made effective as of
August 6, 2015, in the original principal amount of $100,000 (the “Supplemental
Debenture”);
 
WHEREAS, Borrower, Lender and others entered into, or are otherwise parties to
and bound by, the terms of that certain Amended and Restated Securities Purchase
Agreement, dated and made effective as of October 27, 2015 (the “Restated
Purchase Agreement”), which amended and restated the terms and conditions of the
Original Purchase Agreement in its entirety, as further modified by that certain
First Amendment to Amended and Restated Securities Purchase Agreement, dated as
of April 30, 2016 (the “First Amendment”, together with the Supplemental
Purchase Agreement and the Restated Purchase Agreement together with any
amendments, renewals, substitutions, replacements or modifications from time to
time, collectively referred to as the “Purchase Agreement”); and
 
WHEREAS, pursuant to the Restated Purchase Agreement, Borrower executed and
delivered to Lender that certain Amended, Restated and Consolidated Senior
Secured Convertible Redeemable Debenture, dated and made effective as of October
27, 2015 in the original principal amount of $1,050,000 (the “Restated
Debenture”), which Restated Debenture amended, restated, consolidated and
replaced the Original Debenture in its entirety (the Restated Debenture and the
Supplemental Debenture, collectively referred to as the “First Debentures”); and
 
WHEREAS, pursuant to the First Amendment, the Borrower executed and delivered to
Lender that certain Second Replacement Debenture A, dated as of April 30, 2016,
in the original principal amount of $150,000 (the “Second Replacement Debenture
A”), as well as that certain Second Replacement Debenture B, dated as of April
30, 2016, in the original principal amount of $2,681,209.82 (the “Second
Replacement Debenture B”), which Second Replacement Debenture A and Second
Replacement Debenture B, together, replaced and superseded the First Debentures;
and
 
WHEREAS, pursuant to a Debt Purchase Agreement, dated June 9, 2016 (the “DPA”),
Lender sold, assigned, and transferred the Second Replacement Debenture A to Old
Main Capital, LLC (“Old Main”); and
 
WHEREAS, pursuant to the DPA, Lender and Old Main entered into that certain
Option Agreement, dated June 9, 2016 (the “Option Agreement”), pursuant to which
Lender granted Old Main an Option (as defined therein) to purchase assigned
debt, provided Old Main exercised the Option in accordance with the terms and
conditions of the Option Agreement and made certain options payments to Lender
as required by the Option Agreement; and
 
 

 
 
WHEREAS, pursuant to the DPA and Option Agreement, the Second Replacement
Debenture B was further severed, split, divided and apportioned into two (2)
separate and distinct replacement debentures, same being a Third Replacement
Debenture A dated as of July 14, 2016 from Borrower to Lender in the original
principal amount of $150,000 (the “Third Replacement Debenture A”) and a Third
Replacement Debenture B dated as of July 14, 2016 from Borrower to Lender in the
original principal amount of $2,484,433.61 (the “Third Replacement Debenture
B”), which Third Replacement Debenture A and Third Replacement Debenture B,
together, replaced and superseded the Second Replacement B in its entirety; and
 
WHEREAS, pursuant to the DPA and Option Agreement, Lender sold, assigned and
transferred Third Replacement Debenture A to Old Main; and
 
WHEREAS, pursuant to the DPA and Option Agreement, the Third Replacement
Debenture B was further severed, split, divided and apportioned into two (2)
separate and distinct replacement debentures, same being a Fourth Replacement
Debenture A dated as of August 3, 2016 from Borrower to Lender in the original
principal amount of $150,000 (the “Fourth Replacement Debenture A”) and a Fourth
Replacement Debenture B dated as of August 3, 2016 from Borrower to Lender in
the original principal amount of $2,360,777.95 (the “Fourth Replacement
Debenture B”), which Fourth Replacement Debenture A and Fourth Replacement
Debenture B, together, replaced and superseded the Third Replacement B in its
entirety; and
 
WHEREAS, pursuant to the DPA and Option Agreement, Lender sold, assigned and
transferred Fourth Replacement Debenture A to Old Main; and
 
WHEREAS, on or about August 2016, the Lender, Old Main and the Borrower entered
into that certain First Amendment to Debt Purchase Agreement pursuant to which
Old Main was granted the right to purchase from Lender up to two (2) additional
tranches of remaining debt, each in an amount up to $150,000, the first of such
tranche to be purchased by no later than August 25, 2016 and the second tranche
to be purchased by no later than September 25, 2016; and
 
WHEREAS, Assignee desires to purchase from Lender, and Lender is amenable to
selling and assigning to Assignee, Assignor’s right, title and interest in and
to a portion of the monetary obligations evidenced by the Fourth Replacement
Debenture B, not including $300,000 of such monetary obligations which the
Assignor is permitted to sell and assign to Old Main following the date hereof
(the “Assigned Debt”), which Assigned Debt shall be purchased by Assignee in
multiple tranches as more specifically hereinafter set forth; and
 
WHEREAS, on or prior to each “Purchase Tranche Closing” (as hereinafter
defined), as directed by Lender, Borrower agrees to sever, split, divide and
apportion the Fourth Replacement Debenture B (or any replacement debentures
issued in replacement thereof as hereby contemplated, as applicable) into two
separate and distinct replacement debentures, each in substantially the form as
set forth on Exhibit “A” attached hereto (the “Debenture Form”), one for the
amount of the portion of the Assigned Debt being sold and assigned at such
Purchase Tranche Closing (the portion of the Assigned Debt being sold and
assigned at each separate Purchase Tranche Closing, as applicable, being
referred to as the “Applicable Assigned Debt”), and one for the remaining amount
of the overall debt evidenced by the Fourth Replacement Debenture B (or any
replacement debentures issued in replacement thereof as hereby contemplated, as
applicable).
 
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and agreed, Assignor, Assignee, and Borrower hereby
covenant and agree as follows:
 
 

 
 
1. Recitals. The recitations set forth in the preamble of this Agreement are
true and correct and incorporated herein by this reference.
 
2. Agreement to Assign Assigned Debt.
 
(a)  Purchase Tranche Closings. Provided Assignee is not in default or breach
under this Agreement, and that no event has occurred that, with the passage of
time, the giving of notice, or both, would constitute a default or breach by
Assignee under this Agreement, and subject to all the terms and provisions of
this Agreement, Assignor hereby agrees to sell and assign to Assignee, and
Assignee hereby agrees to purchase from Assignor, the Assigned Debt, which
Assigned Debt shall be sold in multiple separate tranches (each of such tranches
hereinafter referred to as a “Purchase Tranche”), each of such separate Purchase
Tranches to be sold and assigned on the respective dates and for the respective
amounts set forth in the schedule attached hereto as Exhibit “B” (each closing
of a Purchase Tranche referred to as a “Purchase Tranche Closing” and the
purchase price to be paid for each Applicable Assigned Debt at each Purchase
Tranche Closing, as shown on such attached schedule, referred to as the
“Applicable Purchase Price”); provided, however, nothing herein shall prevent
Assignee from electing to purchase a greater portion of the Assigned Debt than
that set forth in the attached schedule for any given Purchase Tranche Closing,
up to the aggregate amount of the Assigned Debt, by written notice to Assignor
delivered prior to the applicable Purchase Tranche Closing. Notwithstanding the
foregoing or anything to the contrary herein, Assignee may elect, at any time
and in its sole discretion, to not effect up to two (2) separate Purchase
Tranche Closings without triggering any rights hereunder in favor of Assignor or
obligations of Assignee that would otherwise apply in the event Assignee failed
to purchase any applicable Assigned Debt at an applicable Purchase Tranche
Closing. For the avoidance of doubt, with respect to the first two (2) separate
Purchase Tranche Closings that Assignee fails to effect (by not delivering the
Applicable Purchase Price at such Purchase Tranche Closing or otherwise),
neither of such failures shall constitute a default of Assignee’s obligations
under this Agreement, nor shall such failures give rise to a right of
termination pursuant to Section 8(b) below or trigger a termination of
Assignor’s covenants described in Section 2(f) below (as is described in the
last sentence of such section).
 
(b) Deliveries at Each Purchase Tranche Closing. Subject to the terms of this
Agreement, at each Purchase Tranche Closing: (i) Lender shall execute and
deliver to Assignee, an assignment of the Applicable Assigned Debt being sold
and assigned at such Purchase Tranche Closing, substantially in the form
attached hereto as Exhibit “C” (each, an “Assignment”); (ii) Lender shall
deliver to Assignee the replacement debenture for the Applicable Assigned Debt
being sold and assigned at such Purchase Tranche Closing (subject to receipt of
same by Lender from Borrower as provided in Section 2(c) below); (iii) Lender
shall cause its attorney to deliver to Assignee a legal opinion that as of the
date of such Purchase Tranche Closing, Lender is not and has not at any time
been an Affiliate (as that term is defined in the Securities Act of 1933, as
amended (the “Securities Act”)) of Borrower; and (iv) Assignee shall pay to
Lender the Applicable Purchase Price for the Applicable Assigned Debt being sold
and assigned at such Purchase Tranche Closing, by wire transfer of good and
cleared U.S. currency to an account designated by Lender.
 
(c) Borrower’s Obligation to Sever Debentures. On or prior to each Purchase
Tranche Closing, and within no later than two (2) business days after request
therefor is made by Lender to Borrower, Borrower agrees to sever, split, divide
and apportion the Debenture (or any replacement debentures issued in replacement
thereof as hereby contemplated, as applicable) into two separate and distinct
and newly issued replacement debentures, each substantially in the Debenture
Form. One of such replacement debentures shall be for a principal amount equal
to the Applicable Purchase Price corresponding to the Applicable Assigned Debt
for the applicable Purchase Tranche Closing, and the other replacement debenture
shall be for a principal amount equal to the remaining amount of the overall
debt then existing and evidenced by the Fourth Replacement Debenture B (or any
replacement debenture issued in replacement thereof as hereby contemplated, as
applicable). In order to clarify the foregoing, as an example, on or prior to
the first Purchase Tranche Closing contemplated hereby, upon request by Lender,
Borrower shall provide to Lender two replacement debentures in replacement of
the Fourth Replacement Debenture B, one for $80,000, which is the Applicable
Purchase Price for the Applicable Assigned Debt being sold and assigned at the
first Purchase Tranche Closing, and the second for $2,445,842.62 (as of August
15, 2016), which is the amount of the overall debt evidenced by the Fourth
Replacement Debenture B, less the Applicable Purchase Price for the fifth
replacement debenture being sold and assigned at the first Purchase Tranche
Closing. This second replacement debenture shall then be severed in the same
manner for the second Purchase Tranche Closing, and this foregoing process of
severing and issuing replacement debentures shall be repeated for each Purchase
Tranche Closing, until the Assigned Debt is sold and assigned in full, or this
Agreement is otherwise earlier terminated in accordance with its terms. Assignee
acknowledges and understands that Lender’s obligation to sell, assign and
deliver each replacement debenture representing the Applicable Assigned Debt at
each Purchase Tranche Closing is subject to and conditioned upon Borrower
executing and delivering such replacement debentures to Lender in accordance
with this Agreement. Likewise, Lender acknowledges and understands that
Assignee’s obligation to pay the Applicable Purchase Price for the Applicable
Assigned Debt at each Purchase Tranche Closing is subject to and conditioned
upon Borrower executing and delivering such replacement debentures in accordance
with this Agreement.
 
 

 
 
(d) Remaining Debt. Assignee and Borrower acknowledge that at each Purchase
Tranche Closing, and subject to Lender’s receipt of the Applicable Purchase
Price, only the Applicable Assigned Debt represented by the specific replacement
debenture representing the applicable Purchase Tranche shall be deemed sold and
assigned hereunder, it being acknowledged by Assignee and by Borrower that the
remaining portion of the debt evidenced by the Fourth Replacement Debenture B
(or any replacement debentures issued in replacement thereof as hereby
contemplated, as applicable) for which the Applicable Purchase Price has not
been paid and received by Lender (the “Remaining Debt”) shall not be sold or
assigned thereby unless and until additional replacement debentures for
additional Purchase Tranches are thereafter sold in accordance with this
Agreement and the Applicable Purchase Price therefor is received by Lender. The
Remaining Debt shall include no less than $300,000 of debt which shall remain in
the possession of the Assignor to be sold and assigned to Old Main.
 
(e) No Security Rights. Assignee and Borrower each hereby agree and acknowledge
that the sale, transfer and assignment of the Assigned Debt, or any portion
thereof, shall be a sale, transfer and assignment of the monetary obligations
evidenced by such Assigned Debt (or portion thereof) only, and shall not
include, and such sale, transfer and assignment expressly excludes, the
Remaining Debt, as well as excluding any and all security rights, rights to any
collateral, or any other security interests or rights of Assignor of any nature
or kind related to, arising under, or pursuant to, the Purchase Agreement, any
other “Transaction Documents” (as defined in the Purchase Agreement) related
thereto, or any other security agreements, UCC financing statements, or any
other documents or instruments relating to the obligations of Borrower or any
“Guarantors” (as defined in the Purchase Agreement) to Assignor (collectively,
the “Security Rights”), it being agreed and acknowledged that all Security
Rights shall remain with Assignor, as security for any portion of the Assigned
Debt not assigned at any Purchase Tranche Closing, the Remaining Debt, or any
other obligations of Borrower or any Guarantors to Assignor.
 
(f) Covenants of Assignor. As a material inducement to Assignee entering into
this Agreement, for so long as this Agreement remains in effect (but subject to
the last sentence of this Section 2(f)), Assignor covenants and agrees that it
will not: (i) sell all or any portion of the Fourth Replacement Debenture B or
any other Borrower debt owned by Assignor to any other Person (as defined below)
other than Assignee pursuant to the terms of this Agreement, provided, however,
that Assignor shall be permitted to sell $300,000 of the Fourth Replacement
Debenture B to Old Main; (ii) convert or attempt to convert all or any portion
of the Remaining Debt; and (iii) at any time, accept payments (whether in full
or partial payments) of the then outstanding Remaining Debt, or any portion of
the Assigned Debt not assigned at any Purchase Tranche Closing, in an amount of
less than $250,000.00, whether such payments are made by Borrower, any other
Person purchasing all or any portion of the then outstanding Remaining Debt, or
any portion of the Assigned Debt not assigned at any Purchase Tranche Closing,
or any other Person, provided, however, that Assignor shall be permitted to sell
$300,000 of the Fourth Replacement Debenture B to Old Main in tranches of less
than $250,000. Notwithstanding anything herein to the contrary, Assignor’s
covenants set forth in this Section 2(f) shall terminate in the event Assignee
fails to pay the Applicable Purchase Price for any Assigned Debt as and when
required under the terms of this Agreement.
 
 

 
 
3. Conditions to Purchases.
 
(a) Closing Conditions. The obligation of Assignee to purchase any Assigned
Debt, to pay the Applicable Purchase Price at each applicable Purchase Tranche
Closing and to perform any other obligations hereunder shall be subject to the
satisfaction as determined by, or waived by, Assignee of the following
conditions on or before each applicable Purchase Tranche Closing: (i) the
representations, warranties and covenants of Assignor and Borrower contained
herein shall be true and correct in all material respects on the date hereof and
as of the date of each applicable Purchase Tranche Closing with the same force
and effect as though made on and as of the Effective Date, except for those
representations and warranties that are expressly limited by their terms to
dates or times other than the Effective Date, which representations and
warranties need only be true and correct in all material respects as of such
other date or time; (ii) Assignor shall have performed and complied in all
material respects with all covenants and agreements required hereby to be
performed or complied with by Assignor on or prior to date of each applicable
Purchase Tranche Closing; (iii) Assignor shall have delivered to Assignee those
documents required under Section 2(b) above; and (iv) Borrower and Assignee
shall have signed, or be unconditionally prepared to sign, an Exchange Agreement
in a form reasonably acceptable to Assignee (the “Exchange Agreement”). The
Exchange Agreement shall (A) be effective subsequent to the each Purchase
Tranche Closing hereunder (e.g., to be effective the day following the
applicable Purchase Tranche Closing), (B) be in a form satisfactory to Assignee
in its sole discretion, and (C) serve as a material inducement to Buyer for
purposes of each Purchase Tranche Closing under this Agreement.
 
(b) Initial Purchase. The initial Purchase Tranche contemplated hereunder shall
be closed and funded simultaneous with the execution of this Agreement by
Lender, Assignee and Borrower.
 
(c) Subsequent Purchases.  If the first Purchase Tranche Closing is consummated
hereunder, and the Applicable Purchase Price therefor is paid and received by
Lender as contemplated under this Agreement, then Assignee’s obligation to
purchase any additional Purchase Tranches as hereby contemplated is a binding
and continuing obligation of Assignee (subject, however, to the last sentence of
Section 2(a) above); provided, however, Assignee shall have the right to
terminate such obligation at any time during the term of this Agreement upon the
occurrence of any of the following events (each a “Trigger Event”): (i) Borrower
fails to stay current in its filing obligations with the SEC; (ii) trading of
Borrower’s Common Stock on the “Principal Trading Market” (as defined in the
Purchase Agreement) is stopped or halted for any reason; (iii) any suspension of
electronic trading or settlement services by the Depository Trust Company
(“DTC”) with respect to the Common Stock occurs and is continuing, or any
receipt by Borrower of any notice from DTC to the effect that a suspension of
electronic trading or settlement services by DTC with respect to the Common
Stock is being imposed or is contemplated (unless, prior to such suspension, DTC
shall have notified Borrower in writing that DTC has determined not to impose
any such suspension); (iv) Borrower’s transfer agent (the “Transfer Agent”)
fails to issue to Assignee any shares of Borrower’s Common Stock which may be
due to Assignee in connection with any conversion rights exercised by Assignee
under any debentures purchased by Assignee hereunder, or debentures issued in
replacement thereof; (v) Borrower fails to maintain its active status with its
state of organization; (vi) Borrower shall default (beyond any applicable notice
and cure periods) in any of its obligations to Assignee under the debentures
purchased by Assignee hereunder, or debentures issued in replacement thereof,
the Exchange Agreement, or any other obligations of Borrower to Assignee; (vii)
Borrower fails to maintain any share reserve required by Assignee; (viii)
Assignor shall accelerate or otherwise seek to collect any amount due and
payable by Borrower to Assignor under the Debenture; or (ix) or in the event of
any default or breach by Lender or Borrower of any covenant, representation, or
warranty made to Assignee under this Agreement, including without limitation if
any representation or warranty made by Lender or Borrower hereunder was false
when made or as of the date of any Purchase Tranche Closing. Upon the occurrence
of a Trigger Event, in the event Assignee desires to terminate its obligation to
purchase Purchase Tranches as hereby contemplated, Assignee shall deliver to
Lender written notice of such termination at any time following the occurrence
of the Trigger Event (which notice shall include a statement of the Trigger
Event that has occurred and reasonable evidence of the occurrence thereof),
whereupon Assignee’s obligation to purchase any additional Purchase Tranches
thereafter shall immediately terminate and be of no further force or effect.
Notwithstanding the foregoing, following the occurrence of any Trigger Event,
Assignee may elect to terminate its obligation to purchase additional Purchase
Tranches without terminating this Agreement, in which event Assignee may
continue purchasing additional Purchase Tranches under this Agreement in its
sole discretion, but shall have no obligation to do so. Moreover, and for the
avoidance of doubt, once a Trigger Event has occurred, Assignee shall be
entitled to all rights set forth in this Section 3(c) and such rights shall
continue thereafter until this Agreement is terminated, even if such Trigger
Event is subsequently cured.
 
 

 
 
4. Representations and Warranties of Assignor. Assignor makes the following
representations and warranties to Assignee, each of which shall be deemed made
as of the Effective Date, and re-made as of each Purchase Tranche Closing:
 
(a) Assignor acquired: (i) the Original Debenture directly from Borrower on July
9, 2015; (ii) the Supplemental Debenture directly from Borrower on August 6,
2015; and (iii) and the Restated Debenture directly from Borrower on October 27,
2015 and delivered to Borrower the full amount of the purchase price therefor in
cash on or before each applicable date (in furtherance thereof, on or prior to
the Effective Date, Assignor has delivered documentary evidence to Assignee that
such purchase price was paid in full on or before such date). Assignor is the
legal and equitable owner of Assignor’s right, title and interest in and to the
Assigned Debt, except for any portion of the Assigned Debt previously sold and
assigned to Assignee pursuant to this Agreement, and Assignor has the sole and
unrestricted right to sell and/or transfer the Assigned Debt to Assignee
pursuant to this Agreement; and
 
(b) Upon transfer to Assignee of the Assigned Debt hereunder, Assignee will have
good and unencumbered title to the Assigned Debt, free and clear of any and all
liens, claims, and encumbrances (for the avoidance of doubt, the Assigned Debt
shall not include the debt to be purchased by Old Main following the date
hereof); and
 
(c) Assignor has not sold, transferred, assigned, pledged, hypothecated, or
otherwise encumbered the Assigned Debt, or any portion thereof, except for any
portion of the Assigned Debt previously sold and assigned to Assignee pursuant
to this Agreement (for the avoidance of doubt, the Assigned Debt shall not
include the debt to be purchased by Old Main following the date hereof).
Assignor makes this representation and warranty after diligent inquiry. Assignor
has complied in all respects with all securities and other applicable laws in
relation with the purchase, holding and transfer of the Fourth Replacement
Debenture B as contemplated herein. No violation of securities and other
applicable laws occurred in connection with the acquisition, issuance, or
holding of the Fourth Replacement Debenture B; and
 
(d) No other written document, loan agreement, instrument, contract, amendment
or modification to the Fourth Replacement Debenture B exists that supplements,
modifies, or amends the terms set forth in the Debenture, except as have been
delivered to Assignee prior to the Effective Date;
 
(e) Assignor has not acquired any other promissory notes or debt instrument
issued by Borrower and is not seeking to otherwise invest in debt instruments or
equity securities issued by Borrower. Assignor is not currently trying to sell
or market any debt instrument or equitable securities in Borrower other than the
Assigned Debt; and
 
(f) Assignor is voluntarily assuming all risks associated with the sale of the
Assigned Debt and expressly warrants and represents that (i) Assignee has not
made, and Assignor disclaims the existence of or its reliance on, any
representation by Assignee concerning Borrower or the Fourth Replacement
Debenture B; (ii) Assignor is not relying on any disclosure or non-disclosure
made or not made, or the completeness thereof, in connection with or arising out
of the sale of the Assigned Debt; (iii) Assignor has no claims against Assignee
or Borrower with respect to the foregoing and if any such claim may exist,
Assignor, recognizing its disclaimer of reliance and Assignee’s reliance on such
disclaimer as a condition to entering into this transaction, covenants and
agrees not to assert it against Assignee, Borrower or any of Assignee’s
partners, representatives, agents or affiliates; (iv) Assignee and Borrower
shall have no liability to Assignor; (v) and Assignor waives and releases any
claim that it might have against Assignee and/or Borrower or any of Assignee’s
partners, representatives, agents and affiliates whether under applicable
securities law or otherwise, based on any Assignee’s knowledge, possession or
nondisclosure to Assignor of any material, non-public information concerning
Borrower or its direct and indirect subsidiaries, or its future prospects; and
 
 

 
 
(g) Assignor has conducted its own independent investigation, review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition, technology and prospects of Borrower, which
investigation, review and analysis was done by Assignor. Assignor acknowledges
that it has been provided adequate access to the personnel, properties, premises
and records of Borrower for such purpose; and
 
(h) To the knowledge of Assignor, Assignor is not in possession of any material
non-public information regarding claims against or the ongoing business
operations, risks, or business prospects of Borrower; and
 
(i) The Fourth Replacement Debenture B was issued as a result of a pre-existing
business relationship between Borrower and Assignor and not the result of any
advertising or general solicitations; and
 
(j) Assignor is aware of Borrower’s business affairs and financial condition and
has reached an informed and knowledgeable decision to assign the Assigned Debt
to Assignee; and
 
(k) Assignor, together with its affiliates, is not and has not at any time
during the last ninety (90) days been an officer, director, or beneficial owner
(as such term is defined in the Securities Exchange Act of 1934, as amended) of
10% or more of the equity of Borrower, and is not otherwise an Affiliate of
Borrower; and
 
(l) Assignor has not taken any other action and is not aware of any action taken
by Borrower or any other Person that would restart the holding period for the
Assigned Debt as described in Rule 144 of the Rules and Regulations promulgated
under the Securities Act (“Rule 144”); and
 
(m) Assignor is an “Accredited Investor” within the meaning of Rule 501 of
Regulation D under the Securities Act, as presently in effect; and
 
(n) Assignor is acting exclusively for its own account and not in concert with
any other person or entity in connection with the transactions contemplated
hereby. Assignor does not intend to, and will not, directly or indirectly, use
the proceeds received pursuant to this Agreement for the purpose of investing in
Borrower; and
 
(o) Assignor is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right,
corporate, partnership or other applicable power and authority to enter into and
to consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder, and the execution, delivery and performance
by Assignor of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate, partnership, or similar action on the
part of Assignor; and
 
(p) The execution, delivery and performance by Assignor of this Agreement, all
other documents referred to herein, and the transactions contemplated hereby (i)
have been duly authorized by all necessary officers, managers or general
partners of Assignor, (ii) do not contravene the terms of Assignor’s charter
documents, or any amendment thereof, (iii) do not materially violate, conflict
with or result in any material breach or contravention of, or the creation of
any lien under, any contractual obligation of Assignor or any requirement of law
applicable to Assignor, and (iv) to the knowledge of Assignor, do not materially
violate any orders of any governmental authority against, or binding upon,
Assignor; and
 
 

 
 
(q) No approval, consent, compliance, exemption, authorization or other action
by, or notice to, or filing with, any governmental authority or any other person
or entity, and no lapse of a waiting period under any requirement of law, is
necessary or required in connection with the execution, delivery or performance
by, or enforcement against, Assignor, of this Agreement; and
 
(r) This Agreement has been duly executed and delivered by Assignor and
constitutes the legal, valid and binding obligations of Assignor, enforceable
against Assignor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors’ rights generally or by equitable principles relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity); and
 
(s) There is no action, suit, proceeding, judgment, claim or investigation
pending, or to the knowledge of Assignor, threatened against Assignor which
could reasonably be expected in any manner to challenge or seek to prevent,
enjoin, alter or materially delay any of the transactions contemplated hereby;
and
 
(t) Following the purchase of no more than $300,000 of Remaining Debt from the
Assignor, Old Main shall have no further options or rights to purchase all or
any portion of the Assigned Debt and both the Option Agreement and the DPA shall
be terminated (or otherwise expire) and each such agreement shall be of no
further force or effect; and
 
(u) Except for the foregoing representations and warranties, this Agreement and
the Assignment is made by Assignor without recourse, representation or warranty
of any nature or kind, express or implied, and Assignor specifically disclaims
any warranty, guaranty or representation, oral or written, past, present or
future with respect to the Assigned Debt, any portion thereof, or any
instruments evidencing same, including, without limitation: (i) the validity,
existence, or priority of any lien or security interest securing the obligations
of Borrower or any other credit parties evidenced by the Assigned Debt, any
portion thereof, or any instruments evidencing same; (ii) the existence of, or
basis for, any claim, counterclaim, defense or offset relating to the Assigned
Debt, any portion thereof, or any instruments evidencing same; (iii) the
financial condition of Borrower, or any other credit parties or guarantor or
obligor liable under the Assigned Debt, any portion thereof, or any instruments
evidencing same, or the ability of any such parties to pay or perform their
respective obligations under the Assigned Debt, any portion thereof, or any
instruments evidencing same; (iv) the value or condition of any collateral
securing the obligations under the Assigned Debt, any portion thereof, or any
instruments evidencing same; and (v) the future performance of Borrower or any
other credit parties or guarantor or obligor liable under the Assigned Debt, any
portion thereof, or any instruments evidencing same. Assignee acknowledges and
represents to Assignor that Assignee has been given the opportunity to undertake
its own investigations of Borrower, the Assigned Debt, any portion thereof, or
any instruments evidencing same, and having undertaken and performed all such
investigations as Assignee deemed necessary or desirable, Assignee represents,
warrants and agrees that it is relying solely on its own investigation of
Borrower, the Assigned Debt, any portion thereof, or any instruments evidencing
same, and not any information whatsoever provided or to be provided by Assignor,
other than Assignor’s representations, warranties, and covenants set forth in
this Agreement.
 
5. Representations and Warranties of Assignee. Assignee makes the following
representations and warranties to Assignor, each of which shall be deemed made
as of the Effective Date, and re-made as of each Purchase Tranche Closing:
 
(a) Assignee is a legally recognized entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
full right, corporate, partnership or other applicable power and authority to
enter into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder, and the execution, delivery
and performance by Assignee of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or similar action on the
part of Assignee.
 
 

 
 
(b) This Agreement, when executed and delivered by Assignee, will constitute a
valid and legally binding obligation of Assignee, enforceable against Assignee
in accordance with its terms, except: (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors' rights
generally; or (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
 
(c) Assignee: (i) either alone or together with its representatives, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of this investment and make an informed decision
to so invest, and has so evaluated the risks and merits of such investment; (ii)
has the ability to bear the economic risks of this investment and can afford a
complete loss of such investment; (iii) understands the terms of and risks
associated with the acquisition of the Assigned Debt, or any portion thereof, or
any instruments evidencing same, including, without limitation, a lack of
liquidity, price transparency or pricing availability and risks associated with
the industry in which Borrower operates; (iv) has had the opportunity to review
Borrower, its business, its financial condition, its prospects, the Purchase
Agreement, the Assigned Debt, any portion thereof, or any instruments evidencing
same, all as Assignee has determined to be necessary in connection with this
Agreement and the assignments contemplated hereby.
 
(d) Assignee understands that: (i) the Assigned Debt, any portion thereof, or
any instruments evidencing same, have not been registered under the Securities
Act or the securities laws of any state; (ii) the Assigned Debt, any portion
thereof, or any instruments evidencing same, and any securities issuable upon
conversion of the Assigned Debt, or any portion thereof, is and will be
“restricted securities” as said term is defined in Rule 144; (iii) the Assigned
Debt, any portion thereof, or any instruments evidencing same, may not be sold,
pledged or otherwise transferred unless a registration statement for such
transaction is effective under the Securities Act and any applicable state
securities laws, or unless an exemption from such registration is available with
respect to such transaction; and (iv) the Assigned Debt, any portion thereof, or
any instruments evidencing same, will restrictive legends as to the foregoing in
customary form.
 
(e) Assignee is not accepting this Agreement or any Assignment as a result of
any advertisement, article, notice or other communication regarding the Assigned
Debt, any portion thereof, or any instruments evidencing same published in any
newspaper, magazine, internet or social media, broadcast over television or
radio, presented at any seminary, or under any other media generally circulated
or available to the public or any other general solicitation or general
advertisement.
 
(f) Neither the execution and delivery of this Agreement, or any Assignment, nor
the consummation of the transactions contemplated hereby, does or will violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any government, governmental
agency, or court to which Assignee is subject or any provision of its
organizational documents or other similar governing instruments, or conflict
with, violate or constitute a default under any agreement, credit facility, debt
or other instrument or understanding to which Assignee is a party. Assignee has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with this Agreement and the
assignment of the Assigned Debt, any portion thereof, or any instruments
evidencing same as contemplated hereby.
 
(g) There is no action, suit, proceeding, judgment, claim or investigation
pending, or to the knowledge of Assignee, threatened against Assignee which
could reasonably be expected in any manner to challenge or seek to prevent,
enjoin, alter or materially delay any of the transactions contemplated hereby.
 
 

 
 
(h) No authorization, consent, approval or other order of, or declaration to or
filing with, any governmental agency or body or other Person is required for the
valid authorization, execution, delivery and performance by Assignee of this
Agreement and the consummation of the transactions contemplated hereby.
 
(i) Assignee hereby acknowledges that the Assigned Debt, any portion thereof, or
any instruments evidencing same may only be disposed of in compliance with state
and federal securities laws. Assignee further acknowledges that in connection
with any transfer of the Assigned Debt, any portion thereof, or any instruments
evidencing same subsequent to the date hereof and other than pursuant to an
effective registration statement, or an applicable exemption to such
registration requirements, Borrower and/or Borrower’s transfer agent may require
an opinion of counsel, the form and substance of which opinion shall be
reasonably satisfactory Borrower’s transfer agent.
 
6. Borrower Acknowledgments. Borrower hereby consents to the sale and purchase
of the Assigned Debt pursuant to the terms of this Agreement. Borrower further
represents and warrants that the obligations evidenced by the Fourth Replacement
Debenture B, including, without limitation, all obligations for the Assigned
Debt and the Remaining Debt, are valid and enforceable obligations of Borrower
subject to no defenses, setoffs, counterclaims, cross-actions or equities in
favor of Borrower, and to the extent Borrower has any defenses, setoffs,
counterclaims, cross-actions or equities against Assignor and/or against the
enforceability of any such obligations, Borrower acknowledges and agrees that
same are hereby fully and unconditionally waived by Borrower. Borrower further
acknowledges its obligations under Section 2(c) above, and agrees to timely and
promptly deliver replacement debentures to Lender as required by this Agreement.
Borrower further acknowledges that the Assigned Debt may only represent a
portion of the obligations due or owing under the Fourth Replacement Debenture
B, and that the Assigned Debt is only being assigned hereunder in Purchase
Tranches as contemplated above. In that regard, Borrower further acknowledges
that the Remaining Debt, and any portion of the Assigned Debt for which the
Applicable Purchase Price therefor has not been received by Lender, are and
remain valid and enforceable obligations of Borrower. Borrower agrees and
acknowledges that it is and shall remain liable to pay the Remaining Debt, and
any portion of the Assigned Debt for which the Applicable Purchase Price
therefor has not been received by Lender, as same becomes due in accordance with
the terms of the Purchase Agreement and the Fourth Replacement Debenture B, or
any replacement debentures issued in replacement thereof as hereby contemplated,
and nothing contained herein shall be deemed or construed any waiver or to
otherwise excuse performance by Borrower under its obligations to Lender.
 
7. RELEASE.
 
(a) AS A MATERIAL INDUCEMENT FOR LENDER TO AGREE TO ENTER INTO THIS AGREEMENT,
BORROWER AND ASSIGNEE HEREBY RELEASE LENDER, TOGETHER WITH ALL OF ITS PARTNERS
AND AFFILIATES, AND THE OFFICERS, MEMBERS, DIRECTORS, PARTNERS, EMPLOYEES,
AGENTS AND ATTORNEYS OF EACH OF THE FOREGOING, FROM ALL CLAIMS, CAUSES OF ACTION
AND LIABILITIES OF ANY NATURE OR KIND IN ANY WAY RELATING, DIRECTLY OR
INDIRECTLY, TO THE ASSIGNED DEBT, ANY COLLATERAL SECURING ANY OBLIGATIONS
THEREUNDER, THIS AGREEMENT, OR ANY OTHER DEBTS OR OBLIGATIONS IN ANY WAY
RELATING TO THE PURCHASE AGREEMENT, TO THE EXTENT ARISING ON OR PRIOR TO THE
DATE HEREOF, INCLUDING, WITHOUT LIMITATION, ANY AND ALL CLAIMS ARISING FROM OR
RELATING TO NEGOTIATIONS, DEMANDS, REQUESTS OR EXERCISE OF REMEDIES IN
CONNECTION WITH THE ASSIGNED DEBT, THIS AGREEMENT, ANY OTHER DEBTS OR
OBLIGATIONS IN ANY WAY RELATING TO THE PURCHASE AGREEMENT, AND ANY AND ALL FEES
OR CHARGES COLLECTED IN CONNECTION WITH THE ASSIGNED DEBT, THIS AGREEMENT, OR
ANY OTHER DEBTS OR OBLIGATIONS IN ANY WAY RELATING TO THE PURCHASE AGREEMENT.
MOREOVER UPON DELIVERY OF EACH ASSIGNMENT HEREUNDER, THE FOREGOING RELEASE SHALL
BE DEEMED AUTOMATICALLY RE-MADE AND EFFECTIVE FOR ALL CLAIMS, CAUSES OF ACTION
AND LIABILITIES OF ANY NATURE OR KIND COVERED HEREBY TO THE EXTENT ARISING ON OR
PRIOR TO THE DATE OF SUCH ASSIGNMENT.
 
 

 
 
(b) AS A MATERIAL INDUCEMENT FOR ASSIGNEE TO AGREE TO ENTER INTO THIS AGREEMENT,
BORROWER AND LENDER HEREBY RELEASE ASSIGNEE, TOGETHER WITH ALL OF ITS PARTNERS
AND AFFILIATES, AND THE OFFICERS, MEMBERS, DIRECTORS, PARTNERS, EMPLOYEES,
AGENTS AND ATTORNEYS OF EACH OF THE FOREGOING, FROM ALL CLAIMS, CAUSES OF ACTION
AND LIABILITIES OF ANY NATURE OR KIND IN ANY WAY RELATING, DIRECTLY OR
INDIRECTLY, TO THE ASSIGNED DEBT, ANY COLLATERAL SECURING ANY OBLIGATIONS
THEREUNDER, THIS AGREEMENT, OR ANY OTHER DEBTS OR OBLIGATIONS IN ANY WAY
RELATING TO THE PURCHASE AGREEMENT, TO THE EXTENT ARISING ON OR PRIOR TO THE
DATE HEREOF, INCLUDING, WITHOUT LIMITATION, ANY AND ALL CLAIMS ARISING FROM OR
RELATING TO NEGOTIATIONS, DEMANDS, REQUESTS OR EXERCISE OF REMEDIES IN
CONNECTION WITH THE ASSIGNED DEBT, THIS AGREEMENT, ANY OTHER DEBTS OR
OBLIGATIONS IN ANY WAY RELATING TO THE PURCHASE AGREEMENT, AND ANY AND ALL FEES
OR CHARGES COLLECTED IN CONNECTION WITH THE ASSIGNED DEBT, THIS AGREEMENT, OR
ANY OTHER DEBTS OR OBLIGATIONS IN ANY WAY RELATING TO THE PURCHASE AGREEMENT.
MOREOVER UPON DELIVERY OF EACH APPLICABLE PURCHASE PRICE HEREUNDER, THE
FOREGOING RELEASE SHALL BE DEEMED AUTOMATICALLY RE-MADE AND EFFECTIVE FOR ALL
CLAIMS, CAUSES OF ACTION AND LIABILITIES OF ANY NATURE OR KIND COVERED HEREBY TO
THE EXTENT ARISING ON OR PRIOR TO THE DATE OF SUCH PAYMENT.
 
8. Default and Termination.
 
(a) Breach By Assignor. In the event Assignor shall breach any of its covenants
or agreements hereunder, and such breach is not cured within twenty (20) days
after Assignor’s receipt of written notice of such breach from Assignee, which
notice shall specify the breach with specificity, then Assignee’s sole and
exclusive remedy hereunder shall be to terminate this Agreement upon written
notice to Assignor, whereupon this Agreement shall terminate and Assignor and
Assignee shall have no further obligation, each to the other, under this
Agreement. Assignor and Assignee agree that the foregoing exclusive remedy will
be adequate and each of them agrees that Assignee shall not have any other
remedies, at law or in equity, for any breach by Assignor not cured within any
applicable notice and cure period, other than termination of this Agreement as
hereby provided.
 
(b) Breach By Assignee. In the event Assignee shall breach any of its covenants
or agreements hereunder, and such breach is not cured within twenty (20) days
after Assignee’s receipt of written notice of such breach from Assignor, which
notice shall specify the breach with specificity, then Assignor’s sole and
exclusive remedy hereunder shall be to terminate this Agreement upon written
notice to Assignee, whereupon this Agreement shall terminate and Assignor and
Assignee shall have no further obligation, each to the other, under this
Agreement. Assignor and Assignee agree that the foregoing exclusive remedy will
be adequate and each of them agrees that Assignor shall not have any other
remedies, at law or in equity, for any breach by Assignee not cured within any
applicable notice and cure period, other than termination of this Agreement as
hereby provided.
 
(c) Breach by Borrower. Any breach by Borrower under this Agreement shall be
deemed an event of default by Borrower under the Purchase Agreement, and any
such breach may be enforced by Assignor or Assignee through any remedies
available to Assignor or Assignee, as applicable, at law or in equity, or under
the Purchase Agreement. Borrower shall have no rights to enforce this Agreement
as against Assignor or Assignee, nor shall any breach or default by Assignor or
Assignee hereunder in any way abrogate, limit, or otherwise affect Borrower’s
obligations under the Purchase Agreement and related Transaction Documents.
 
 

 
 
9. No Waiver. The parties recognize and acknowledge that by entering into this
Agreement, Lender is not waiving any rights or remedies it may have under any of
the Transaction Documents, any defaults or Events of Default arising thereunder,
or any judgments previously obtained by Lender in connection therewith. In
addition, subject to Section 2(f) herein, the Lender shall have the right, at
any time, to accept payments (whether in full or partial payments) of the then
outstanding Remaining Debt, or any portion of the Assigned Debt not assigned at
any Purchase Tranche Closing, whether such payments are made by the Borrower,
any other Person purchasing all or any portion of the then outstanding Remaining
Debt, or any portion of the Assigned Debt not assigned at any Purchase Tranche
Closing, or any other Person, and in such event, Lender shall have the absolute
right to terminate this Agreement, without liability to Assignee or any other
Person, with respect to any portion of the Assigned Debt not yet sold and
assigned to Assignee as of such date.
 
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws governing the Fourth Replacement Debenture B.
 
11. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY
AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE
RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY
AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY
APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO
ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S
RIGHT TO DEMAND TRIAL BY JURY.
 
12. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
 
13. Headings. The headings of the paragraphs of this Agreement have been
included only for convenience, and shall not be deemed in any manner to modify
or limit any of the provisions of this Agreement or used in any manner in the
interpretation of this Agreement.
 
14. Interpretation. Whenever the context so requires in this Agreement, all
words used in the singular shall be construed to have been used in the plural
(and vice versa), each gender shall be construed to include any other genders,
and the word “Person” shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate or any
other entity.
 
15. Partial Invalidity. Each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. If any provision of this
Agreement or the application of such provision to any person or circumstances
shall, to any extent, be invalid or unenforceable, then the remainder of this
Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected by such invalidity or unenforceability.
 
16. Execution. This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed and considered one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format file or other similar
format file, such signature shall be deemed an original for all purposes and
shall create a valid and binding obligation of the party executing same with the
same force and effect as if such facsimile or “.pdf” signature page was an
original thereof.
 
17. Effective Date. For purposes of this Agreement, the “Effective Date” shall
mean the date when this Agreement becomes fully executed by all parties hereto.
 
18. Legal Fees. Borrower hereby agrees to pay to the Lender, or its counsel, a
fee in the amount of $7,500, to reimburse Lender for fees incurred by Lender for
the preparation, negotiation and execution of this Agreement (and documents
entered into between Borrower and Lender related hereto), and all other
documents in connection herewith, which fees shall be paid simultaneously with
the execution of this Agreement (unless previously paid). In the event of any
action at law or in equity to enforce or interpret the terms of this Agreement,
the parties agree that the prevailing party shall be entitled to an additional
award of the full amount of the attorneys’ fees and expenses paid by such
prevailing party in connection with the litigation and/or dispute without
reduction or apportionment based upon the individual claims or defenses giving
rise to the fees and expenses. Nothing herein shall restrict or impair a court’s
power to award fees and expenses for frivolous or bad faith pleading.
 
[Signatures on the following page]
 
 

 
 
IN WITNESS WHEREOF, Assignor, Assignee, and Borrower have executed this
Agreement as of the date above first written.
 
Assignor:
 
TCA GLOBAL CREDIT MASTER FUND, LP
 
By:          TCA Global Credit Fund GP, Ltd.
Its:           General Partner
 
By:           /s/ Robert Press
  Robert Press, Director
 
Date: August 15, 2016
 
 
Assignee:
 
CHICAGO VENTURE PARTNERS, L.P.
 
 
By: Chicago Venture Management, L.L.C.,
       its General Partner
 
By:  CVM, Inc., its Manager
 
 
By: /s/ John M. Fife
       John M. Fife, President
 
 
Date:   August 15, 2016
 
 
 

 
IN WITNESS WHEREOF, Assignor, Assignee, and Borrower have executed this
Agreement as of the date above first written.
 
Borrower:
 
GROWLIFE, INC.
 
 
By:       /s/ Marco Hegyi
Name:  Marco Hegyi
Title:    CEO
Date:    August 15, 2016
 
 
 
 
 

 
EXHIBIT “A”
 
FORM OF REPLACEMENT DEBENTURE A
 
 
NEITHER THIS DEBENTURE NOR THE SECURITIES THAT ARE ISSUABLE TO THE HOLDER UPON
CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS
OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR
PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED:
(I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN THE ABSENCE
OF AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE ISSUER, THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD,
TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.
 
BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SEC
6049(B)(4) OF THE INTERNAL REVENUE CODE AND REGULATIONS THEREUNDER) AND THAT IT
IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT
RECIPIENT DESCRIBED IN SEC. 6049(B)(4) OF THE INTERNAL REVENUE CODE AND THE
REGULATIONS THEREUNDER).
 
$__________  Issuance and Effective Date: as of __________
 
 
FOR VALUE RECEIVED, GROWLIFE, INC., a Delaware corporation (the “Borrower”),
whose address is 5400 Carillon Point, Kirkland, WA 98033, promises to pay to the
order of TCA GLOBAL CREDIT MASTER FUND, LP (hereinafter, together with any
holder hereof, “Lender”), whose address is 3960 Howard Hughes Parkway, Suite
500, Las Vegas, Nevada 89169, _____________ ($___________), together with
interest (computed on the actual number of days elapsed on the basis of a 360
day year) thereon and all other fees, charges and all other Obligations due and
payable in accordance with the terms of that certain Securities Purchase
Agreement dated as of April 30, 2015, but made effective as of July 9, 2015,
executed by and among Borrower and Lender (the “Original Purchase Agreement”),
as supplemented by that certain Securities Purchase Agreement dated as of April
30, 2015, but made effective as of August 6, 2015 (the “Supplemental Purchase
Agreement”), together with Amended and Restated Purchase Agreement dated as of
October 27, 2015 (the “Restated Purchase Agreement”), as further amended by that
certain First Amendment to Amended and Restated Purchase Agreement dated as of
April 30, 2016 (the “First Amendment”) (the Original Purchase Agreement, the
Supplemental Purchase Agreement, the Restated Purchase Agreement, and the First
Amendment, together with all other renewals, extensions, future advances,
amendments, modifications, substitutions, or replacements thereof, sometimes
collectively referred to as the “Purchase Agreement”). Capitalized words and
phrases not otherwise defined herein shall have the meanings assigned thereto in
the Purchase Agreement.
 
 

 
 
This _______ Replacement Debenture A (“Debenture”), along with the ________
Replacement Debenture B being executed by Borrower simultaneously herewith
(“Debenture B”), evidence the Debentures and other Obligations incurred by the
Borrower under and pursuant to the Purchase Agreement, to which reference is
hereby made for a statement of the terms and conditions under which any payment
hereon may be accelerated. The holder of this Debenture is entitled to all of
the benefits and security provided for in the Purchase Agreement and all other
Transaction Documents executed by and between Borrower and Lender.
 
This Debenture, along with Debenture B being executed and delivered
simultaneously herewith, are being both executed in substitution for and to
supersede the ______ Replacement Debenture B dated as of __________ (the
“Existing Note”), in its entirety. It is the intention of the Borrower and
Lender that while this Debenture and Debenture B replace and supersede the
Existing Note, in its entirety, it is not in payment or satisfaction of the
Existing Note, but rather is the substitute of one evidence of debt for another
without any intent to extinguish the old. Nothing contained in this Debenture or
Debenture B shall be deemed to extinguish the indebtedness and obligations
evidenced by the Existing Note or constitute a novation of the indebtedness
evidenced by the Existing Note.
 
Principal, interest and other fees and charges shall be paid to Lender as set
forth in the Purchase Agreement, or at such other place as the holder of this
Debenture shall designate in writing to Borrower. Each Debenture made by Lender,
and all payments on account of the principal and interest thereof shall be
recorded on the books and records of Lender and the principal balance as shown
on such books and records, or any copy thereof certified by an officer of
Lender, shall be rebuttably presumptive evidence of the principal amount owing
hereunder.
 
Except for such notices as may be required under the terms of the Purchase
Agreement, Borrower waives presentment, demand, notice, protest, and all other
demands, or notices, in connection with the delivery, acceptance, performance,
default, or enforcement of this Debenture, and assents to any extension or
postponement of the time of payment or any other indulgence.
 
Borrower shall be solely responsible for the payment of any and all documentary
stamps and other taxes applicable to the full face amount of this Debenture.
This Debenture shall be governed and construed in accordance with the laws of
the State of Nevada, and shall be binding upon Borrower and their legal
representatives, successors, and assigns. Wherever possible, each provision of
the Purchase Agreement and this Debenture shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of the
Purchase Agreement or this Debenture shall be prohibited by or be invalid under
such law, such provision shall be severable, and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining provisions of
the Purchase Agreement or this Debenture.
 
Nothing herein contained, nor in any instrument or transaction relating hereto,
shall be construed or so operate as to require any Borrower, or any person
liable for the payment of this Debenture, to pay interest in an amount or at a
rate grater than the highest rate permissible under applicable law. By
acceptance hereof, Lender hereby warrants and represents to Borrower that Lender
has no intention of charging a usurious rate of interest. Should any interest or
other charges paid by Borrower, or any parties liable for the payments made
pursuant to this Debenture, result in the computation or earning of interest in
excess of the highest rate permissible under applicable law, any and all such
excess shall be and the same is hereby waived by the holder hereof. Lender shall
make adjustments in the Debenture or Purchase Agreement, as applicable, as
necessary to ensure that Borrower will not be required to pay further interest
in excess of the amount permitted by applicable law. All such excess shall be
automatically credited against and in reduction of the outstanding principal
balance. Any portion of such excess which exceeds the outstanding principal
balance shall be paid by the holder hereof to the Lender and any parties liable
for the payment of this Debenture, it being the intent of the parties hereto
that under no circumstances shall Borrower, or any party liable for the payments
hereunder, be required to pay interest in excess of the highest rate permissible
under applicable law.
 

 
 
THE HOLDER IS A NON-U.S. PERSON AS THAT TERM IS DEFINED IN THE UNITED STATES
INTERNAL REVENUE CODE.  IT IS HEREBY AGREED AND UNDERSTOOD THAT THE OBLIGATIONS
HEREUNDER MAY BE SOLD OR RESOLD ONLY TO NON-U.S. PERSONS.  THE INTEREST PAYABLE
HEREUNDER IS PAYABLE ONLY OUTSIDE THE UNITED STATES.  ANY U.S. PERSON WHO HOLDS
THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME
TAX LAW.
 
Conversion of Debenture. At any time and from time to time while this Debenture
is outstanding, but only upon the occurrence of an Event of Default under the
Purchase Agreement or any other Transaction Documents, this Debenture may be, at
the sole option of the Lender, convertible into shares of the common stock, par
value $0.0001 per share (the “Common Stock”) of Borrower, in accordance with the
terms and conditions set forth below.
 
(a)           Voluntary Conversion. At any time while this Debenture is
outstanding, but only upon the occurrence of an Event of Default under the
Purchase Agreement or any other Transaction Documents, the Lender may convert
all or any portion of the outstanding principal, accrued and unpaid interest,
and any other sums due and payable hereunder or under the Purchase Agreement
(such total amount, the “Conversion Amount”) into shares of Common Stock of the
Borrower (the “Conversion Shares”) at a price equal to: (i) the Conversion
Amount (the numerator); divided by (ii) eighty-five percent (85%) of the lowest
of the daily volume weighted average price of the Borrower’s Common Stock during
the five (5) Business Days immediately prior to the Conversion Date, which price
shall be indicated in the conversion notice (in the form attached hereto as
Exhibit “A”, the “Conversion Notice”) (the denominator) (the “Conversion
Price”). The Lender shall submit a Conversion Notice indicating the Conversion
Amount, the number of Conversion Shares issuable upon such conversion, and where
the Conversion Shares should be delivered.
 
(b)           The Lender’s Conversion Limitations. The Borrower shall not effect
any conversion of this Debenture, and the Lender shall not have the right to
convert any portion of this Debenture, to the extent that after giving effect to
the conversion set forth on the Conversion Notice submitted by the Lender, the
Lender (together with the Lender’s Affiliates and any Persons acting as a group
together with the Lender or any of the Lender’s Affiliates) would beneficially
own shares of Common Stock in excess of the Beneficial Ownership Limitation (as
defined herein). To ensure compliance with this restriction, prior to delivery
of any Conversion Notice, the Lender shall have the right to request that the
Borrower provide to the Lender a written statement of the percentage ownership
of the Borrower’s Common Stock that would be beneficially owned by the Lender
and its Affiliates in the Borrower if the Lender converted such portion of this
Debenture then intended to be converted by Lender. The Borrower shall, within
two (2) Business Days of such request, provide Lender with the requested
information in a written statement, and the Lender shall be entitled to rely on
such written statement from the Borrower in its Conversion Notice and ensuring
that its ownership of the Borrower’s Common Stock is not in excess of the
Beneficial Ownership Limitation. The restriction described in this Section may
be waived by Lender, in whole or in part, upon notice not less than sixty-one
(61) days prior written notice from the Lender to the Borrower to increase such
percentage.
 
 

 
 
For purposes of this Debenture, the “Beneficial Ownership Limitation” shall be
4.99% of the number of shares of Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon conversion
of this Debenture.  The limitations contained in this Section shall apply to a
successor holder of this Debenture. For purposes of this Debenture,
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof.
 
(c)           Mechanics of Conversion. The conversion of this Debenture shall be
conducted in the following manner:
 
(1)           To convert this Debenture into shares of Common Stock on any date
set forth in the Conversion Notice by the Lender (the “Conversion Date”), the
Lender shall transmit by facsimile or electronic mail (or otherwise deliver) a
copy of the fully executed Conversion Notice to the Borrower (or, under certain
circumstances as set forth below, by delivery of the Conversion Notice to the
Borrower’s transfer agent).
 
(2)           Borrower’s Response. Upon receipt by the Borrower of a copy of a
Conversion Notice, the Borrower shall as soon as practicable, but in no event
later than two (2) Business Days after receipt of such Conversion Notice, send,
via facsimile or electronic mail (or otherwise deliver) a confirmation of
receipt of such Conversion Notice (the “Conversion Confirmation”) to the Lender
indicating that the Borrower will process such Conversion Notice in accordance
with the terms herein. In the event the Borrower fails to issue its Conversion
Confirmation within said two (2) Business Day time period, the Lender shall have
the absolute and irrevocable right and authority to deliver the fully executed
Conversion Notice to the Borrower’s transfer agent, and pursuant to the terms of
the Purchase Agreement, the Borrower’s transfer agent shall issue the applicable
Conversion Shares to Lender as hereby provided. Within five (5) Business Days
after the date of the Conversion Confirmation (or the date of the Conversion
Notice, if the Borrower fails to issue the Conversion Confirmation), provided
that the Borrower’s transfer agent is participating in the Depository Trust
Borrower (“DTC”) Fast Automated Securities Transfer (“FAST”) program, the
Borrower shall cause the transfer agent to (or, if for any reason the Borrower
fails to instruct or cause its transfer agent to so act, then pursuant to the
Purchase Agreement, the Lender may request and require the Borrower’s transfer
agent to) electronically transmit the applicable Conversion Shares to which the
Lender shall be entitled by crediting the account of the Lender’s prime broker
with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system, and
provide proof satisfactory to the Lender of such delivery. In the event that the
Borrower’s transfer agent is not participating in the DTC FAST program and is
not otherwise DWAC eligible, within five (5) Business Days after the date of the
Conversion Confirmation (or the date of the Conversion Notice, if the Borrower
fails to issue the Conversion Confirmation), the Borrower shall instruct and
cause its transfer agent to (or, if for any reason the Borrower fails to
instruct or cause its transfer agent to so act, then pursuant to the Purchase
Agreement, the Lender may request and require the Borrower’s transfer agent to)
issue and surrender to a nationally recognized overnight courier for delivery to
the address specified in the Conversion Notice, a certificate, registered in the
name of the Lender, or its designees, for the number of Conversion Shares to
which the Lender shall be entitled. To effect conversions hereunder, the Lender
shall not be required to physically surrender this Debenture to the Borrower
unless the entire principal amount of this Debenture, plus all accrued and
unpaid interest thereon, has been so converted. Conversions hereunder shall have
the effect of lowering the outstanding principal amount of this Debenture in an
amount equal to the applicable conversion.  The Lender and the Borrower shall
maintain records showing the principal amount(s) converted and the date of such
conversion(s).  The Lender, and any assignee by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture may be less than the amount stated on the
face hereof.
 
 

 
 
(3)           Record Lender. The Person(s) entitled to receive the shares of
Common Stock issuable upon a conversion of this Debenture shall be treated for
all purposes as the record holder(s) of such shares of Common Stock as of the
Conversion Date.
 
(4)           Failure to Deliver Certificates. If in the case of any Conversion
Notice, the certificate or certificates are not delivered to or as directed by
the Lender by the date required hereby, the Lender shall be entitled to elect by
written notice to the Borrower at any time on or before its receipt of such
certificate or certificates, to rescind such Conversion Notice, in which event
the Borrower shall promptly return to the Lender any original Debenture
delivered to the Borrower and the Lender shall promptly return to the Borrower
the Common Stock certificates representing the principal amount of this
Debenture unsuccessfully tendered for conversion to the Borrower.
 
(5)           Obligation Absolute; Partial Liquidated Damages. The Borrower’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Lender to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any person or entity or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Lender or any other person or entity of any obligation to
the Borrower or any violation or alleged violation of law by the Lender or any
other person or entity, and irrespective of any other circumstance which might
otherwise limit such obligation of the Borrower to the Lender in connection with
the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Borrower of any such action the Borrower
may have against the Lender. In the event the Lender of this Debenture shall
elect to convert any or all of the outstanding principal amount hereof and
accrued but unpaid interest thereon in accordance with the terms of this
Debenture, the Borrower may not refuse conversion based on any claim that the
Lender or anyone associated or affiliated with the Lender has been engaged in
any violation of law, agreement or for any other reason, unless an injunction
from a court, on notice to Lender, restraining and or enjoining conversion of
all or part of this Debenture shall have been sought and obtained, and the
Borrower posts a surety bond for the benefit of the Lender in the amount of 150%
of the outstanding principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to such Lender to the extent it obtains judgment. In the absence of
such injunction, the Borrower shall issue Conversion Shares upon a properly
noticed conversion. If the Borrower fails for any reason to deliver to the
Lender such certificate or certificates representing Conversion Shares pursuant
to timing and delivery requirements of this Debenture, the Borrower shall pay to
such Lender, in cash, as liquidated damages and not as a penalty, for each
$1,000 of principal amount being converted, $1.00 per day for each day after the
date by which such certificates should have been delivered until such
certificates are delivered. Nothing herein shall limit a Lender’s right to
pursue actual damages or declare an Event of Default pursuant to the Purchase
Agreement, this Debenture or any agreement securing the indebtedness under this
Debenture for the Borrower’s failure to deliver Conversion Shares within the
period specified herein and such Lender shall have the right to pursue all
remedies available to it hereunder, at law or in equity, including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Lender from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Nothing herein shall prevent the Lender from having the Conversion Shares issued
directly by the Borrower’s transfer agent in accordance with the Purchase
Agreement, in the event for any reason the Borrower fails to issue or deliver,
or cause its transfer agent to issue and deliver, the Conversion Shares to the
Lender upon exercise of Lender’s conversion rights hereunder.
 
 

 
 
(6)           Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Debenture shall be made without charge to the
Lender hereof for any documentary stamp or similar taxes, or any other issuance
or transfer fees of any nature or kind that may be payable in respect of the
issue or delivery of such certificates, any such taxes or fees, if payable, to
be paid by the Borrower.
 
(d)           Make-Whole Rights. Upon liquidation by the Lender of Conversion
Shares issued pursuant to a Conversion Notice, provided that the Lender realizes
a net amount from such liquidation equal to less than the Conversion Amount
specified in the relevant Conversion Notice (such net realized amount, the
“Realized Amount”), the Borrower shall issue to the Lender additional shares of
the Borrower’s Common Stock equal to: (i) the Conversion Amount specified in the
relevant Conversion Notice; minus (ii) the Realized Amount, as evidenced by a
reconciliation statement from the Lender (a “Sale Reconciliation”) showing the
Realized Amount from the sale of the Conversion Shares; divided by (iii) the
average volume weighted average price of the Borrower’s Common Stock during the
five (5) Business Days immediately prior to the date upon which the Lender
delivers notice (the “Make-Whole Notice”) to the Borrower that such additional
shares are requested by the Lender (the “Make-Whole Stock Price”) (such number
of additional shares to be issued, the “Make-Whole Shares”). Upon receiving the
Make-Whole Notice and Sale Reconciliation evidencing the number of Make-Whole
Shares requested, the Borrower shall instruct its transfer agent to issue
certificates representing the Make-Whole Shares, which Make whole Shares shall
be issued and delivered in the same manner and within the same time frames as
set forth in Subsection (c)(2) above. Subsections (c)(3), (c)(4), (c)(5) and
(c)(6) above shall be applicable to the issuance of the Make-Whole Shares. The
Make-Whole Shares, when issued, shall be deemed to be validly issued, fully
paid, and non-assessable shares of the Borrower’s Common Stock. Following the
sale of the Make-Whole Shares by the Lender: (i) in the event that the Lender
receives net proceeds from such sale which, when added to the Realized Amount
from the prior relevant Conversion Notice, is less than the Conversion Amount
specified in the relevant Conversion Notice, the Lender shall deliver an
additional Make-Whole Notice to the Borrower following the procedures provided
previously in this paragraph, and such procedures and the delivery of Make-Whole
Notices shall continue until the Conversion Amount has been fully satisfied;
(ii) in the event that the Lender received net proceeds from the sale of
Make-Whole Shares in excess of the Conversion Amount specified in the relevant
Conversion Notice, such excess amount shall be applied to satisfy any and all
amounts owed hereunder in excess of the Conversion Amount specified in the
relevant Conversion Notice.
 
(e)           Adjustments to Conversion Price.
 
(1)           Stock Dividends and Stock Splits.  If the Borrower, at any time
while this Debenture is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on
outstanding shares of Common Stock, (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of a
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues, in the event of a reclassification of shares of Common
Stock, any shares of capital stock of the Borrower, then the Conversion Price
shall be multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock (excluding any treasury shares of the Borrower)
outstanding immediately before such event, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination, or
re-classification.
 
 

 
 
(2)           Fundamental Transaction. If, at any time while this Debenture is
outstanding: (i) the Borrower effects any merger or consolidation of the
Borrower with or into another Person, (ii) the Borrower effects any sale of all
or substantially all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Borrower
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) the Borrower effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then upon any subsequent
conversion of this Debenture, the Lender shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one (1) share
of Common Stock (the “Alternate Consideration”).  For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one (1) share of Common Stock in
such Fundamental Transaction, and the Borrower shall apportion the Conversion
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Lender shall be
given the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction.  To the
extent necessary to effectuate the foregoing provisions, any successor to the
Borrower or surviving entity in such Fundamental Transaction shall issue to the
Lender a new debenture consistent with the foregoing provisions and evidencing
the Lender’s right to convert such debenture into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this Section and insuring that this Debenture (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
 
(3)           Adjustment to Conversion Price.  Whenever the Conversion Price is
adjusted pursuant to any provision of this Debenture, the Borrower shall
promptly deliver to Lender a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
 
(4)           Notice to Allow Conversion by Lender.  If: (A) the Borrower shall
declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Borrower shall declare a special nonrecurring cash dividend on or
a redemption of the Common Stock, (C) the Borrower shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Borrower shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Borrower is a party, any sale or transfer of all or substantially all
of the assets of the Borrower, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property, or (E) the
Borrower shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Borrower, then, in each case, the Borrower
shall cause to be filed at each office or agency maintained for the purpose of
conversion of this Debenture, and shall cause to be delivered to the Lender at
its last address as it shall appear upon the Borrower’s records, at least twenty
(20) calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating: (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein
or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice.  The Lender is entitled to convert this
Debenture during the 10-day period commencing on the date of such notice through
the effective date of the event triggering such notice.
 
 
[SIGNATURE PAGE FOLLOWS]
 
 

 
 
IN WITNESS WHEREOF, the Borrower has executed this Debenture as of the date set
forth above.
 
BORROWER:
 
GROWLIFE, INC., a Delaware corporation
 
 
By:            _____________________________
Name:       _____________________________
Title:         _____________________________
 
 
 
 
 
 

 
EXHIBIT “A”
 
NOTICE OF CONVERSION
 
The undersigned hereby elects to convert principal, interest, and other
Obligations under the Revolving Debenture (the “Debenture”) of GROWLIFE, INC., a
Delaware corporation (the “Borrower”), into shares of common stock, par value
$0.0001 per share (the “Common Shares”), of the Borrower in accordance with the
conditions of the Debenture, as of the date written below.  
 
Based solely on information provided by the Borrower to Holder, the undersigned
represents and warrants to the Borrower that its ownership of the Common Shares
does not exceed the Beneficial Ownership Limitation determined in accordance
with Section 13(d) of the Exchange Act of 1934, as amended, as specified under
the Debenture.
 
Conversion calculations
Effective Date of
Conversion:                                                    
_______________________
Principal Amount and/or Interest to be Converted:                    
_______________________
Number of Common Shares to be Issued:                                  
_______________________
 
[HOLDER]
 
By: _____________________________
 
Name: __________________________
 
Title: ____________________________
 
Address: _________________________
               __________________________
               __________________________
 
 
 
 

 
 
 
FORM DEBENTURE
 
FORM OF REPLACEMENT DEBENTURE B
 
 
NEITHER THIS DEBENTURE NOR THE SECURITIES THAT ARE ISSUABLE TO THE HOLDER UPON
CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS
OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR
PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED:
(I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN THE ABSENCE
OF AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE ISSUER, THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD,
TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.
 
BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SEC
6049(B)(4) OF THE INTERNAL REVENUE CODE AND REGULATIONS THEREUNDER) AND THAT IT
IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT
RECIPIENT DESCRIBED IN SEC. 6049(B)(4) OF THE INTERNAL REVENUE CODE AND THE
REGULATIONS THEREUNDER).
 
 
$_____________                                                                                               
Issuance and Effective Date: as of ________
 
 
 
FOR VALUE RECEIVED, GROWLIFE, INC., a Delaware corporation (the “Borrower”),
whose address is 5400 Carillon Point, Kirkland, WA 98033, promises to pay to the
order of TCA GLOBAL CREDIT MASTER FUND, LP (hereinafter, together with any
holder hereof, “Lender”), whose address is 3960 Howard Hughes Parkway, Suite
500, Las Vegas, Nevada 89169, _______________________________________________
($___________), together with interest (computed on the actual number of days
elapsed on the basis of a 360 day year) thereon and all other fees, charges and
all other Obligations due and payable in accordance with the terms of that
certain Securities Purchase Agreement dated as of April 30, 2015, but made
effective as of July 9, 2015, executed by and among Borrower and Lender (the
“Original Purchase Agreement”), as supplemented by that certain Securities
Purchase Agreement dated as of April 30, 2015, but made effective as of August
6, 2015 (the “Supplemental Purchase Agreement”), together with Amended and
Restated Purchase Agreement dated as of October 27, 2015 (the “Restated Purchase
Agreement”), as further amended by that certain First Amendment to Amended and
Restated Purchase Agreement dated as of April 30, 2016 (the “First Amendment”)
(the Original Purchase Agreement, the Supplemental Purchase Agreement, the
Restated Purchase Agreement, and the First Amendment, together with all other
renewals, extensions, future advances, amendments, modifications, substitutions,
or replacements thereof, sometimes collectively referred to as the “Purchase
Agreement”). Capitalized words and phrases not otherwise defined herein shall
have the meanings assigned thereto in the Purchase Agreement.
 
 

 
 
This _______ Replacement Debenture B (“Debenture”), along with the Sixth
Replacement Debenture A being executed by Borrower simultaneously herewith
(“Debenture A”), evidence the Debentures and other Obligations incurred by the
Borrower under and pursuant to the Purchase Agreement, to which reference is
hereby made for a statement of the terms and conditions under which any payment
hereon may be accelerated. The holder of this Debenture is entitled to all of
the benefits and security provided for in the Purchase Agreement and all other
Transaction Documents executed by and between Borrower and Lender.
 
This Debenture, along with Debenture A being executed and delivered
simultaneously herewith, are being both executed in substitution for and to
supersede the _______ Replacement Debenture B dated as of ________ (the
“Existing Note”), in its entirety. It is the intention of the Borrower and
Lender that while this Debenture and Debenture A replace and supersede the
Existing Note, in its entirety, it is not in payment or satisfaction of the
Existing Note, but rather is the substitute of one evidence of debt for another
without any intent to extinguish the old. Nothing contained in this Debenture or
Debenture A shall be deemed to extinguish the indebtedness and obligations
evidenced by the Existing Note or constitute a novation of the indebtedness
evidenced by the Existing Note.
 
Principal, interest and other fees and charges shall be paid to Lender as set
forth in the Purchase Agreement, or at such other place as the holder of this
Debenture shall designate in writing to Borrower. Each Debenture made by Lender,
and all payments on account of the principal and interest thereof shall be
recorded on the books and records of Lender and the principal balance as shown
on such books and records, or any copy thereof certified by an officer of
Lender, shall be rebuttably presumptive evidence of the principal amount owing
hereunder.
 
Except for such notices as may be required under the terms of the Purchase
Agreement, Borrower waives presentment, demand, notice, protest, and all other
demands, or notices, in connection with the delivery, acceptance, performance,
default, or enforcement of this Debenture, and assents to any extension or
postponement of the time of payment or any other indulgence.
 
Borrower shall be solely responsible for the payment of any and all documentary
stamps and other taxes applicable to the full face amount of this Debenture.
This Debenture shall be governed and construed in accordance with the laws of
the State of Nevada, and shall be binding upon Borrower and their legal
representatives, successors, and assigns. Wherever possible, each provision of
the Purchase Agreement and this Debenture shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of the
Purchase Agreement or this Debenture shall be prohibited by or be invalid under
such law, such provision shall be severable, and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining provisions of
the Purchase Agreement or this Debenture.
 
Nothing herein contained, nor in any instrument or transaction relating hereto,
shall be construed or so operate as to require any Borrower, or any person
liable for the payment of this Debenture, to pay interest in an amount or at a
rate grater than the highest rate permissible under applicable law. By
acceptance hereof, Lender hereby warrants and represents to Borrower that Lender
has no intention of charging a usurious rate of interest. Should any interest or
other charges paid by Borrower, or any parties liable for the payments made
pursuant to this Debenture, result in the computation or earning of interest in
excess of the highest rate permissible under applicable law, any and all such
excess shall be and the same is hereby waived by the holder hereof. Lender shall
make adjustments in the Debenture or Purchase Agreement, as applicable, as
necessary to ensure that Borrower will not be required to pay further interest
in excess of the amount permitted by applicable law. All such excess shall be
automatically credited against and in reduction of the outstanding principal
balance. Any portion of such excess which exceeds the outstanding principal
balance shall be paid by the holder hereof to the Lender and any parties liable
for the payment of this Debenture, it being the intent of the parties hereto
that under no circumstances shall Borrower, or any party liable for the payments
hereunder, be required to pay interest in excess of the highest rate permissible
under applicable law.
 

 
 
THE HOLDER IS A NON-U.S. PERSON AS THAT TERM IS DEFINED IN THE UNITED STATES
INTERNAL REVENUE CODE.  IT IS HEREBY AGREED AND UNDERSTOOD THAT THE OBLIGATIONS
HEREUNDER MAY BE SOLD OR RESOLD ONLY TO NON-U.S. PERSONS.  THE INTEREST PAYABLE
HEREUNDER IS PAYABLE ONLY OUTSIDE THE UNITED STATES.  ANY U.S. PERSON WHO HOLDS
THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME
TAX LAW.
 
Conversion of Debenture. At any time and from time to time while this Debenture
is outstanding, but only upon the occurrence of an Event of Default under the
Purchase Agreement or any other Transaction Documents, this Debenture may be, at
the sole option of the Lender, convertible into shares of the common stock, par
value $0.0001 per share (the “Common Stock”) of Borrower, in accordance with the
terms and conditions set forth below.
 
(a)           Voluntary Conversion. At any time while this Debenture is
outstanding, but only upon the occurrence of an Event of Default under the
Purchase Agreement or any other Transaction Documents, the Lender may convert
all or any portion of the outstanding principal, accrued and unpaid interest,
and any other sums due and payable hereunder or under the Purchase Agreement
(such total amount, the “Conversion Amount”) into shares of Common Stock of the
Borrower (the “Conversion Shares”) at a price equal to: (i) the Conversion
Amount (the numerator); divided by (ii) eighty-five percent (85%) of the lowest
of the daily volume weighted average price of the Borrower’s Common Stock during
the five (5) Business Days immediately prior to the Conversion Date, which price
shall be indicated in the conversion notice (in the form attached hereto as
Exhibit “A”, the “Conversion Notice”) (the denominator) (the “Conversion
Price”). The Lender shall submit a Conversion Notice indicating the Conversion
Amount, the number of Conversion Shares issuable upon such conversion, and where
the Conversion Shares should be delivered.
 
(b)           The Lender’s Conversion Limitations. The Borrower shall not effect
any conversion of this Debenture, and the Lender shall not have the right to
convert any portion of this Debenture, to the extent that after giving effect to
the conversion set forth on the Conversion Notice submitted by the Lender, the
Lender (together with the Lender’s Affiliates and any Persons acting as a group
together with the Lender or any of the Lender’s Affiliates) would beneficially
own shares of Common Stock in excess of the Beneficial Ownership Limitation (as
defined herein). To ensure compliance with this restriction, prior to delivery
of any Conversion Notice, the Lender shall have the right to request that the
Borrower provide to the Lender a written statement of the percentage ownership
of the Borrower’s Common Stock that would be beneficially owned by the Lender
and its Affiliates in the Borrower if the Lender converted such portion of this
Debenture then intended to be converted by Lender. The Borrower shall, within
two (2) Business Days of such request, provide Lender with the requested
information in a written statement, and the Lender shall be entitled to rely on
such written statement from the Borrower in its Conversion Notice and ensuring
that its ownership of the Borrower’s Common Stock is not in excess of the
Beneficial Ownership Limitation. The restriction described in this Section may
be waived by Lender, in whole or in part, upon notice not less than sixty-one
(61) days prior written notice from the Lender to the Borrower to increase such
percentage.
 
 

 
 
For purposes of this Debenture, the “Beneficial Ownership Limitation” shall be
4.99% of the number of shares of Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon conversion
of this Debenture.  The limitations contained in this Section shall apply to a
successor holder of this Debenture. For purposes of this Debenture,
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof.
 
(c)           Mechanics of Conversion. The conversion of this Debenture shall be
conducted in the following manner:
 
(1)           To convert this Debenture into shares of Common Stock on any date
set forth in the Conversion Notice by the Lender (the “Conversion Date”), the
Lender shall transmit by facsimile or electronic mail (or otherwise deliver) a
copy of the fully executed Conversion Notice to the Borrower (or, under certain
circumstances as set forth below, by delivery of the Conversion Notice to the
Borrower’s transfer agent).
 
(2)           Borrower’s Response. Upon receipt by the Borrower of a copy of a
Conversion Notice, the Borrower shall as soon as practicable, but in no event
later than two (2) Business Days after receipt of such Conversion Notice, send,
via facsimile or electronic mail (or otherwise deliver) a confirmation of
receipt of such Conversion Notice (the “Conversion Confirmation”) to the Lender
indicating that the Borrower will process such Conversion Notice in accordance
with the terms herein. In the event the Borrower fails to issue its Conversion
Confirmation within said two (2) Business Day time period, the Lender shall have
the absolute and irrevocable right and authority to deliver the fully executed
Conversion Notice to the Borrower’s transfer agent, and pursuant to the terms of
the Purchase Agreement, the Borrower’s transfer agent shall issue the applicable
Conversion Shares to Lender as hereby provided. Within five (5) Business Days
after the date of the Conversion Confirmation (or the date of the Conversion
Notice, if the Borrower fails to issue the Conversion Confirmation), provided
that the Borrower’s transfer agent is participating in the Depository Trust
Borrower (“DTC”) Fast Automated Securities Transfer (“FAST”) program, the
Borrower shall cause the transfer agent to (or, if for any reason the Borrower
fails to instruct or cause its transfer agent to so act, then pursuant to the
Purchase Agreement, the Lender may request and require the Borrower’s transfer
agent to) electronically transmit the applicable Conversion Shares to which the
Lender shall be entitled by crediting the account of the Lender’s prime broker
with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system, and
provide proof satisfactory to the Lender of such delivery. In the event that the
Borrower’s transfer agent is not participating in the DTC FAST program and is
not otherwise DWAC eligible, within five (5) Business Days after the date of the
Conversion Confirmation (or the date of the Conversion Notice, if the Borrower
fails to issue the Conversion Confirmation), the Borrower shall instruct and
cause its transfer agent to (or, if for any reason the Borrower fails to
instruct or cause its transfer agent to so act, then pursuant to the Purchase
Agreement, the Lender may request and require the Borrower’s transfer agent to)
issue and surrender to a nationally recognized overnight courier for delivery to
the address specified in the Conversion Notice, a certificate, registered in the
name of the Lender, or its designees, for the number of Conversion Shares to
which the Lender shall be entitled. To effect conversions hereunder, the Lender
shall not be required to physically surrender this Debenture to the Borrower
unless the entire principal amount of this Debenture, plus all accrued and
unpaid interest thereon, has been so converted. Conversions hereunder shall have
the effect of lowering the outstanding principal amount of this Debenture in an
amount equal to the applicable conversion.  The Lender and the Borrower shall
maintain records showing the principal amount(s) converted and the date of such
conversion(s).  The Lender, and any assignee by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture may be less than the amount stated on the
face hereof.
 
 

 
 
(3)           Record Lender. The Person(s) entitled to receive the shares of
Common Stock issuable upon a conversion of this Debenture shall be treated for
all purposes as the record holder(s) of such shares of Common Stock as of the
Conversion Date.
 
(4)           Failure to Deliver Certificates. If in the case of any Conversion
Notice, the certificate or certificates are not delivered to or as directed by
the Lender by the date required hereby, the Lender shall be entitled to elect by
written notice to the Borrower at any time on or before its receipt of such
certificate or certificates, to rescind such Conversion Notice, in which event
the Borrower shall promptly return to the Lender any original Debenture
delivered to the Borrower and the Lender shall promptly return to the Borrower
the Common Stock certificates representing the principal amount of this
Debenture unsuccessfully tendered for conversion to the Borrower.
 
(5)           Obligation Absolute; Partial Liquidated Damages. The Borrower’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Lender to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any person or entity or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Lender or any other person or entity of any obligation to
the Borrower or any violation or alleged violation of law by the Lender or any
other person or entity, and irrespective of any other circumstance which might
otherwise limit such obligation of the Borrower to the Lender in connection with
the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Borrower of any such action the Borrower
may have against the Lender. In the event the Lender of this Debenture shall
elect to convert any or all of the outstanding principal amount hereof and
accrued but unpaid interest thereon in accordance with the terms of this
Debenture, the Borrower may not refuse conversion based on any claim that the
Lender or anyone associated or affiliated with the Lender has been engaged in
any violation of law, agreement or for any other reason, unless an injunction
from a court, on notice to Lender, restraining and or enjoining conversion of
all or part of this Debenture shall have been sought and obtained, and the
Borrower posts a surety bond for the benefit of the Lender in the amount of 150%
of the outstanding principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to such Lender to the extent it obtains judgment. In the absence of
such injunction, the Borrower shall issue Conversion Shares upon a properly
noticed conversion. If the Borrower fails for any reason to deliver to the
Lender such certificate or certificates representing Conversion Shares pursuant
to timing and delivery requirements of this Debenture, the Borrower shall pay to
such Lender, in cash, as liquidated damages and not as a penalty, for each
$1,000 of principal amount being converted, $1.00 per day for each day after the
date by which such certificates should have been delivered until such
certificates are delivered. Nothing herein shall limit a Lender’s right to
pursue actual damages or declare an Event of Default pursuant to the Purchase
Agreement, this Debenture or any agreement securing the indebtedness under this
Debenture for the Borrower’s failure to deliver Conversion Shares within the
period specified herein and such Lender shall have the right to pursue all
remedies available to it hereunder, at law or in equity, including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Lender from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Nothing herein shall prevent the Lender from having the Conversion Shares issued
directly by the Borrower’s transfer agent in accordance with the Purchase
Agreement, in the event for any reason the Borrower fails to issue or deliver,
or cause its transfer agent to issue and deliver, the Conversion Shares to the
Lender upon exercise of Lender’s conversion rights hereunder.
 
 

 
 
(6)           Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Debenture shall be made without charge to the
Lender hereof for any documentary stamp or similar taxes, or any other issuance
or transfer fees of any nature or kind that may be payable in respect of the
issue or delivery of such certificates, any such taxes or fees, if payable, to
be paid by the Borrower.
 
(d)           Make-Whole Rights. Upon liquidation by the Lender of Conversion
Shares issued pursuant to a Conversion Notice, provided that the Lender realizes
a net amount from such liquidation equal to less than the Conversion Amount
specified in the relevant Conversion Notice (such net realized amount, the
“Realized Amount”), the Borrower shall issue to the Lender additional shares of
the Borrower’s Common Stock equal to: (i) the Conversion Amount specified in the
relevant Conversion Notice; minus (ii) the Realized Amount, as evidenced by a
reconciliation statement from the Lender (a “Sale Reconciliation”) showing the
Realized Amount from the sale of the Conversion Shares; divided by (iii) the
average volume weighted average price of the Borrower’s Common Stock during the
five (5) Business Days immediately prior to the date upon which the Lender
delivers notice (the “Make-Whole Notice”) to the Borrower that such additional
shares are requested by the Lender (the “Make-Whole Stock Price”) (such number
of additional shares to be issued, the “Make-Whole Shares”). Upon receiving the
Make-Whole Notice and Sale Reconciliation evidencing the number of Make-Whole
Shares requested, the Borrower shall instruct its transfer agent to issue
certificates representing the Make-Whole Shares, which Make whole Shares shall
be issued and delivered in the same manner and within the same time frames as
set forth in Subsection (c)(2) above. Subsections (c)(3), (c)(4), (c)(5) and
(c)(6) above shall be applicable to the issuance of the Make-Whole Shares. The
Make-Whole Shares, when issued, shall be deemed to be validly issued, fully
paid, and non-assessable shares of the Borrower’s Common Stock. Following the
sale of the Make-Whole Shares by the Lender: (i) in the event that the Lender
receives net proceeds from such sale which, when added to the Realized Amount
from the prior relevant Conversion Notice, is less than the Conversion Amount
specified in the relevant Conversion Notice, the Lender shall deliver an
additional Make-Whole Notice to the Borrower following the procedures provided
previously in this paragraph, and such procedures and the delivery of Make-Whole
Notices shall continue until the Conversion Amount has been fully satisfied;
(ii) in the event that the Lender received net proceeds from the sale of
Make-Whole Shares in excess of the Conversion Amount specified in the relevant
Conversion Notice, such excess amount shall be applied to satisfy any and all
amounts owed hereunder in excess of the Conversion Amount specified in the
relevant Conversion Notice.
 
(e)           Adjustments to Conversion Price.
 
(1)           Stock Dividends and Stock Splits.  If the Borrower, at any time
while this Debenture is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on
outstanding shares of Common Stock, (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of a
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues, in the event of a reclassification of shares of Common
Stock, any shares of capital stock of the Borrower, then the Conversion Price
shall be multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock (excluding any treasury shares of the Borrower)
outstanding immediately before such event, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination, or
re-classification.
 
 

 
 
(2)           Fundamental Transaction. If, at any time while this Debenture is
outstanding: (i) the Borrower effects any merger or consolidation of the
Borrower with or into another Person, (ii) the Borrower effects any sale of all
or substantially all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Borrower
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) the Borrower effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then upon any subsequent
conversion of this Debenture, the Lender shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one (1) share
of Common Stock (the “Alternate Consideration”).  For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one (1) share of Common Stock in
such Fundamental Transaction, and the Borrower shall apportion the Conversion
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Lender shall be
given the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction.  To the
extent necessary to effectuate the foregoing provisions, any successor to the
Borrower or surviving entity in such Fundamental Transaction shall issue to the
Lender a new debenture consistent with the foregoing provisions and evidencing
the Lender’s right to convert such debenture into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this Section and insuring that this Debenture (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
 
(3)           Adjustment to Conversion Price.  Whenever the Conversion Price is
adjusted pursuant to any provision of this Debenture, the Borrower shall
promptly deliver to Lender a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
 
(4)           Notice to Allow Conversion by Lender.  If: (A) the Borrower shall
declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Borrower shall declare a special nonrecurring cash dividend on or
a redemption of the Common Stock, (C) the Borrower shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Borrower shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Borrower is a party, any sale or transfer of all or substantially all
of the assets of the Borrower, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property, or (E) the
Borrower shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Borrower, then, in each case, the Borrower
shall cause to be filed at each office or agency maintained for the purpose of
conversion of this Debenture, and shall cause to be delivered to the Lender at
its last address as it shall appear upon the Borrower’s records, at least twenty
(20) calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating: (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein
or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice.  The Lender is entitled to convert this
Debenture during the 10-day period commencing on the date of such notice through
the effective date of the event triggering such notice.
 
 
[SIGNATURE PAGE FOLLOWS]
 
 

 
 
IN WITNESS WHEREOF, the Borrower has executed this Debenture as of the date set
forth above.
 
BORROWER:
 
GROWLIFE, INC., a Delaware corporation
 
 
By:         _____________________________
Name:    _____________________________
Title:      _____________________________
 
 
 
 
 
 

 
EXHIBIT “A”
 
NOTICE OF CONVERSION
 
The undersigned hereby elects to convert principal, interest, and other
Obligations under the Revolving Debenture (the “Debenture”) of GROWLIFE, INC., a
Delaware corporation (the “Borrower”), into shares of common stock, par value
$0.0001 per share (the “Common Shares”), of the Borrower in accordance with the
conditions of the Debenture, as of the date written below.  
 
Based solely on information provided by the Borrower to Holder, the undersigned
represents and warrants to the Borrower that its ownership of the Common Shares
does not exceed the Beneficial Ownership Limitation determined in accordance
with Section 13(d) of the Exchange Act of 1934, as amended, as specified under
the Debenture.
 
Conversion calculations
Effective Date of Conversion:                                              
_______________________
Principal Amount and/or Interest to be Converted:              
_______________________
Number of Common Shares to be Issued:                             
_______________________
 
[HOLDER]
 
By: _____________________________
 
Name: __________________________
 
Title: ____________________________
 
Address: _________________________
               __________________________
               __________________________
 
 
 
 

 
EXHIBIT “B”
 
PURCHASE TRANCHES
 
Purchase Tranche Number
Applicable Purchase Price
Date for Purchase Tranche Closing
1
$80,000
Simultaneously with execution of this Agreement
All additional Purchase Tranches until Assignee has purchased the entire amount
of the Assigned Debt
$80,000
Thirty (30) Days after prior Purchase Tranche Closing*

 
*Subject to Assignee’s right to not effect up to two (2) separate Purchase
Tranche Closings as described more fully in the last sentence of Section 2(a).
 
 

 
 
EXHIBIT “C”
 
FORM OF ASSIGNMENT
 
 
ASSIGNMENT OF NOTE
 
 
THIS ASSIGNMENT OF NOTE (this “Assignment”), is made and entered into as of the
15th day of August, 2016, by TCA GLOBAL CREDIT MASTER FUND, LP, a Cayman Islands
limited partnership, with an address of 3960 Howard Hughes Parkway, Suite 500,
Las Vegas, NV 89169 (“Assignor” or “Lender”), in favor of CHICAGO VENTURE
PARTNERS, L.P., a Utah limited partnership (“Assignee”).
 
W I T N E S S E T H
 
WHEREAS, the parties hereto have entered into a Debt Purchase Agreement dated as
of August 15, 2016 (the “DPA”), pursuant to which Assignor has agreed to assign
to Assignee, its successors and assigns, Assignor’s right, title and interest in
and to a portion of the monetary obligations evidenced by the Fourth Replacement
Debenture B (the “Assigned Debt”), all subject to the terms and conditions set
forth in the DPA and hereinafter set forth; and
 
WHEREAS, Assignor is the present legal and equitable owner and holder of that
certain Fifth Replacement Debenture A dated and effective as of August 15, 2016,
executed by Growlife, Inc. (the “Borrower”), and made payable to the order of
Assignor, in the original principal amount of $80,000.00, representing the first
Purchase Tranche under the DPA (the “Fifth Replacement Debenture A”);
 
NOW, THEREFORE, in consideration of the sum of $80,000.00, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and agreed, Assignor, Assignee, and Borrower hereby covenant and
agree as follows:
 
 
1. Recitals. The recitations set forth in the preamble of this Assignment are
true and correct and incorporated herein by this reference. All capitalized
terms used herein and not otherwise defined in this Assignment shall have the
same meaning ascribed to them in the DPA.
 
2. Assignment. Assignor does hereby transfer, assign, grant, and convey to
Assignee, its successors and assigns, all of the right, title and interest of
Assignor in and to the Assigned Debt only, it being acknowledged by Assignee
that the Remaining Debt is not being assigned hereby.
 
 
3. No Security Rights. Assignee hereby agrees and acknowledges that the sale,
transfer and assignment of the Assigned Debt shall be a sale, transfer and
assignment of the monetary obligations evidenced by such Assigned Debt only, and
shall not include, and such sale, transfer and assignment expressly excludes,
the Remaining Debt, and any and all Security Rights.
 
 
4. Reference to DPA. The assignment contemplated hereby shall be subject to the
representations, warranties, limitations, exclusions, releases, acknowledgments,
and all other terms and provisions of the DPA.
 
5. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws governing the Fifth Replacement Debenture A.
 
 
6. Successors and Assigns. This Assignment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
 

 
 
 
7. Headings. The headings of the paragraphs of this Assignment have been
included only for convenience, and shall not be deemed in any manner to modify
or limit any of the provisions of this Agreement or used in any manner in the
interpretation of this Assignment.
 
8. Interpretation. Whenever the context so requires in this Assignment, all
words used in the singular shall be construed to have been used in the plural
(and vice versa), each gender shall be construed to include any other genders,
and the word “Person” shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate or any
other entity.
 
9. Partial Invalidity. Each provision of this Assignment shall be valid and
enforceable to the fullest extent permitted by law. If any provision of this
Assignment or the application of such provision to any Person or circumstances
shall, to any extent, be invalid or unenforceable, then the remainder of this
Assignment, or the application of such provision to Persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected by such invalidity or unenforceability.
 
10. Execution. In the event that any signature is delivered by facsimile
transmission or by e- mail delivery of a “.pdf” format file or other similar
format file, such signature shall be deemed an original for all purposes and
shall create a valid and binding obligation of the party executing same with the
same force and effect as if such facsimile or “.pdf” signature page was an
original thereof.
 
[Signatures on the following page]
 
 
 
 
 

 
 
 
IN WITNESS WHEREOF, Assignor has executed this Assignment as of the date above
first written.
 
 
 

 
 
Assignor:
 
TCA GLOBAL CREDIT MASTER FUND, LP
 
By:   TCA Global Credit Fund GP, Ltd.
Its:    General Partner
 
By: /s/ Robert Press
       Robert Press, Director