Exhibit 10.2

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO BORROWER.

 

UNSECURED CONVERTIBLE PROMISSORY NOTE

 

Effective Date: February 10, 2015 U.S. $2,000,000.00

 

FOR VALUE RECEIVED, VAPE HOLDINGS, INC., a Delaware corporation (“Borrower”),
promises to pay to REDWOOD MANAGEMENT, LLC, a Florida limited liability company,
or its successors or assigns (“Lender”), $2,000,000.00 and any interest, fees,
charges, and late fees on the date that is twelve (12) months after the Purchase
Price Date (as defined below) (the “Maturity Date”) in accordance with the terms
hereof. This Unsecured Convertible Promissory Note (this “Note”) is issued and
made effective as of February 10, 2015 (the “Effective Date”). For purposes
hereof, the “Outstanding Balance” of this Note means, as of any date of
determination, the Purchase Price (as defined below), as reduced or increased,
as the case may be, pursuant to the terms hereof for redemption, conversion,
offset, or otherwise, plus any original issue discount (“OID”), the Transaction
Expense Amount (as defined below), accrued but unpaid interest, collection and
enforcements costs (including attorneys’ fees) incurred by Lender, transfer,
stamp, issuance and similar taxes and fees related to Conversions (as defined
below), and any other fees or charges (including without limitation late
charges) incurred under this Note. This Note is issued pursuant to that certain
Securities Purchase Agreement dated February 10, 2015, as the same may be
amended from time to time (the “Purchase Agreement”), by and between Borrower
and Lender. Certain capitalized terms used herein but not otherwise defined
shall have the meaning ascribed thereto in the Purchase Agreement. Certain other
capitalized terms used herein are defined in Attachment 1 attached hereto and
incorporated herein by this reference.

 

This Note carries an OID of $182,000.00. In addition, Borrower agrees to pay
$10,000.00 to Lender to cover Lender’s legal fees, accounting costs, due
diligence, monitoring and other transaction costs incurred in connection with
the purchase and sale of this Note (the “Transaction Expense Amount”), all of
which amount is included in the initial principal balance of this Note. The
purchase price for this Note shall be $1,808,000.00 (the “Purchase Price”),
computed as follows: $2,000,000.00 original principal balance, less the OID,
less the Transaction Expense Amount. The Purchase Price shall be payable by
delivery to Borrower at Closing of the Investor Note and a wire transfer of
immediately available funds in the amount of the Initial Cash Purchase Price (as
defined in the Purchase Agreement). For purposes hereof, the term “Purchase
Price Date” means the date the Initial Cash Purchase Price is delivered by
Lender to Borrower.

 

 

 

 

Notwithstanding any other provision contained in this Note, the conversion by
Lender of any portion of the Outstanding Balance shall only be exercisable in
ten (10) tranches (each, a “Tranche”), consisting of (i) an initial Tranche in
an amount equal to $200,000.00 and any interest, costs, fees or charges accrued
thereon or added thereto under the terms of this Note and the other Transaction
Documents (as defined in the Purchase Agreement) (the “Initial Tranche”), and
(ii) nine (9) additional Tranches, each in the amount of $200,000.00, plus any
interest, costs, fees or charges accrued thereon or added thereto under the
terms of this Note and the other Transaction Documents (each, a “Subsequent
Tranche”). The Initial Tranche shall correspond to the Initial Cash Purchase
Price, $19,200.00 of the OID and the Transaction Expense Amount, and may be
converted any time subsequent to the Purchase Price Date. Each Subsequent
Tranche shall correspond to the Investor Note Payment required under the
Investor Note and $19,200.00 of the OID and the Transaction Expense Amount.
Lender’s right to convert any portion of any of the Subsequent Tranches is
conditioned upon Lender’s payment in full of the Investor Note Payment
corresponding to such Subsequent Tranche (upon the satisfaction of such
condition, such Subsequent Tranche becomes a “Conversion Eligible Tranche”). For
the avoidance of doubt, subject to the other terms and conditions hereof, the
Initial Tranche shall be deemed a Conversion Eligible Tranche as of the Purchase
Price Date for all purposes hereunder and may be converted in whole or in part
at any time subsequent to the Purchase Price Date, and each Subsequent Tranche
that becomes a Conversion Eligible Tranche may be converted in whole or in part
at any time subsequent to the first date on which such Subsequent Tranche
becomes a Conversion Eligible Tranche. For all purposes hereunder, Conversion
Eligible Tranches shall be converted (or redeemed, as applicable) in order of
the most recent in time Conversion Eligible Tranche. At all times hereunder, the
aggregate amount of any costs, fees or charges incurred by or assessable against
Borrower hereunder, including, without limitation, any fees, charges or premiums
incurred in connection with an Event of Default (as defined below), shall be
added to the most recent in time then-current Conversion Eligible Tranche.

 

1.       Payment; Prepayment. All payments owing hereunder shall be in lawful
money of the United States of America or Conversion Shares (as defined below),
as provided for herein, and delivered to Lender at the address furnished to
Borrower for that purpose. All payments shall be applied first to (a) costs of
collection, if any, then to (b) fees and charges, if any, then to (c) accrued
and unpaid interest, and thereafter, to (d) principal. Notwithstanding the
foregoing, so long as Borrower has not received a Conversion Notice (as defined
below) from Lender where the applicable Conversion Shares have not yet been
delivered and so long as no Event of Default has occurred since the Effective
Date (whether declared by Lender or undeclared), then Borrower shall have the
right, exercisable on not less than five (5) Trading Days prior written notice
to Lender to prepay the Outstanding Balance of this Note, in full, in accordance
with this Section 1. Any notice of prepayment hereunder (an “Optional Prepayment
Notice”) shall be delivered to Lender at its registered address and shall state:
(y) that Borrower is exercising its right to prepay this Note, and (z) the date
of prepayment, which shall be not less than five (5) Trading Days from the date
of the Optional Prepayment Notice. On the date fixed for prepayment (the
“Optional Prepayment Date”), Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of Lender as may be
specified by Lender in writing to Borrower. If Borrower exercises its right to
prepay this Note, Borrower shall make payment to Lender of an amount in cash
(the “Optional Prepayment Amount”) equal to 125% (the “Prepayment Premium”)
multiplied by the then Outstanding Balance of this Note. In the event Borrower
delivers the Optional Prepayment Amount to Lender prior to the Optional
Prepayment Date or without delivering an Optional Prepayment Notice to Lender as
set forth herein without Lender’s prior written consent, the Optional Prepayment
Amount shall not be deemed to have been paid to Lender until the Optional
Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated
Damages Amount will automatically be added to the Outstanding Balance of this
Note on the day Borrower delivers the Optional Prepayment Amount to Lender. In
the event Borrower delivers the Optional Prepayment Amount without an Optional
Prepayment Notice, then the Optional Prepayment Date will be deemed to be the
date that is five (5) Trading Days from the date that the Optional Prepayment
Amount was delivered to Lender. In addition, if Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender
within two (2) Trading Days following the Optional Prepayment Date, Borrower
shall forever forfeit its right to prepay this Note.

 

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2.       Amortization and Interest.

 

2.1.       Payment of Interest. Borrower shall pay interest to Lender on the
Outstanding Balance (including all Tranches, both Conversion Eligible Tranches
and Subsequent Tranches that have not yet become Conversion Eligible Tranches)
at the rate of 10% per annum from the Purchase Price Date. Any accrued interest
will be payable upon each Conversion (as defined below) and on each Amortization
Payment Date (as defined below). Interest shall be calculated on the basis of a
360-day year, consisting of twelve 30 calendar day periods, and shall accrue
daily commencing on the Purchase Price Date until payment in full of the
outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made.

 

2.2.       Amortization Payments. Starting on August 1, 2015 and August 15, 2015
and continuing on the first and fifteenth day of each of the following six (6)
successive months thereafter (each, an “Amortization Payment Date”) (provided
that, the twelfth and final Amortization Payment Date will be on the twelve
month anniversary of the Purchase Price Date), Borrower shall make payments
(each, an “Amortization Payment”) in the amount and on the date set forth on the
Amortization Schedule attached as Exhibit B. Each Amortization Payment shall, at
the option of Borrower, be made in cash, subject to the Prepayment Premium, or
in Conversion Shares, subject to the Equity Conditions, at the Amortization
Conversion Rate (each such conversion of an Amortization Payment into Conversion
Shares, an “Amortization Conversion”). Notwithstanding any provision in this
Note to the contrary, Borrower will not be required to make any Amortization
Payment to the extent any such Amortization Payment would result in Borrower
making aggregate Amortization Payments in an amount greater than the Outstanding
Balance. The Outstanding Balance of this Note will be due and payable on the
Maturity Date and may be paid in cash, or, in Borrower’s discretion, in
Conversion Shares (subject to the Equity Conditions). For the avoidance of
doubt, Borrower will not have the right to make an Amortization Conversion if
the Equity Conditions are not satisfied in full or waived in writing by Lender
with respect to each Amortization Payment. If Borrower elects to make an
Amortization Conversion, Borrower must deliver on the Amortization Payment Date
(i) a certificate representing the applicable number of Conversion Shares, and
(ii) a notice detailing how Borrower calculated such number of Conversion
Shares. Any Conversion Shares delivered in connection with an Amortization
Conversion shall be delivered in accordance with Section 8 below.

 

2.3.       Amortization Conversion Calculation Errors. In the event Borrower
delivers any Conversion Shares to Lender pursuant to an Amortization Conversion
and Lender reasonably believes Borrower delivered an incorrect number of
Conversion Shares, Lender shall have the right, within five (5) Trading Days of
its receipt of the applicable Conversion Shares, to dispute Borrower’s
calculation of the number of Conversion Shares delivered by delivering written
notice of such dispute to Borrower. If Borrower disagrees with Lender’s dispute,
Borrower and Lender agree to resolve such dispute in accordance with the
provisions of Section 8.5 of the Purchase Agreement. If, following the
resolution of such dispute, it is determined that Borrower is required to
deliver additional Conversion Shares to Lender, Borrower shall deliver such
additional Conversion Shares (in the manner prescribed in Section 8 below) to
Lender within three (3) Trading Days of the resolution of such dispute. However,
if it is determined that Borrower delivered too many Conversion Shares to
Lender, Borrower may elect to either require that Lender return such excess
Conversion Shares to Borrower or apply such excess Conversion Shares towards its
next delivery of Conversion Shares.

 

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3.       Conversion.

 

3.1.       Conversion Price. Subject to the adjustments set forth herein, the
conversion price for each Conversion (the “Conversion Price”) shall be 70% (the
“Conversion Factor”) of the lowest daily VWAP (as defined below) in the ten (10)
Trading Days immediately preceding the applicable Conversion. Additionally, if
at any time after the Effective Date, the Conversion Shares are not DTC
Eligible, then the then-current Conversion Factor will automatically be reduced
by 5% for all future Conversions. Finally, in addition to the Default Effect, if
any Major Default occurs after the Effective Date, the Conversion Factor shall
automatically be reduced for all future Conversions by an additional 5% for each
of the first three (3) Major Defaults that occur after the Effective Date (for
the avoidance of doubt, each occurrence of any Major Default shall be deemed to
be a separate occurrence for purposes of the foregoing reductions in Conversion
Factor, even if the same Major Default occurs three (3) separate times). For
example, the first time the Conversion Shares are not DTC Eligible, the
Conversion Factor for future Conversions thereafter will be reduced from 70% to
65% for purposes of this example. If, thereafter, there are three (3) separate
occurrences of a Major Default pursuant to Section 4.1(i), then for purposes of
this example the Conversion Factor would be reduced by 5% for the first such
occurrence, and so on for each of the second and third occurrences of such Major
Default. Notwithstanding the foregoing, in no event shall the Conversion Factor
be less than 50% or the Conversion Price be less than $0.50 (the “Conversion
Price Floor”).

 

3.2.       Conversions. Lender has the right at any time after the Purchase
Price Date until the Outstanding Balance has been paid in full, including
without limitation until any Optional Prepayment Date (even if Lender has
received an Optional Prepayment Notice), at its election, to convert (each
instance of conversion pursuant to this Section 3 is referred to herein as a
“Lender Conversion”, and together with an Amortization Conversion, a
“Conversion”) all or any part of the Outstanding Balance into Conversion Shares,
as per the following conversion formula: the number of Conversion Shares equals
the amount being converted (the “Conversion Amount”) divided by the Conversion
Price. Conversion notices in the form attached hereto as Exhibit A (each, a
“Conversion Notice”) may be effectively delivered to Borrower by any method of
Lender’s choice (including but not limited to facsimile, email, mail, overnight
courier, or personal delivery), and all Conversions shall be cashless and not
require further payment from Lender. Borrower shall deliver the Conversion
Shares from any Conversion to Lender in accordance with Section 8 below within
three (3) Trading Days of Lender’s delivery of the Conversion Notice to
Borrower.

 

3.3.       Cash Payment Option. Notwithstanding Section 3.2 above, Borrower may,
at its option, elect to pay any Conversion Amount in cash in lieu of delivering
Conversion Shares. If Borrower elects to pay a Conversion Amount in cash, it
must (i) notify Lender of its intention to pay the Conversion Amount in cash
within 24 hours of Lender’s delivery of the Conversion Notice, and (ii) deliver
the cash via wire transfer of immediately available funds within three (3)
Trading Days of Lender’s delivery of the Conversion Notice to Borrower. If
Borrower fails to deliver notice pursuant to the immediately foregoing clause
(i) or fails to make the wire transfer when due pursuant to the immediately
foregoing clause (ii), then Borrower shall be deemed to have waived its right to
pay such Conversion Amount in cash.

 

4.       Defaults and Remedies.

 

4.1.       Defaults. The following are events of default under this Note (each,
an “Event of Default”): (i) Borrower shall fail to pay any principal, interest,
fees, charges, or any other amount when due and payable hereunder; or (ii)
Borrower shall fail to deliver any Conversion Shares pursuant to Section 2 above
in accordance with the terms hereof; or (iii) Borrower shall fail to deliver any
Conversion Shares pursuant to Section 3 above in accordance with the terms
hereof; or (iv) a receiver, trustee or other similar official shall be appointed
over Borrower or a material part of its assets and such appointment shall remain
uncontested for twenty (20) days or shall not be dismissed or discharged within
sixty (60) days; (v) Borrower shall become insolvent or generally fails to pay,
or admits in writing its inability to pay, its debts as they become due, subject
to applicable grace periods, if any; or (vi) Borrower shall make a general
assignment for the benefit of creditors; or (vii) Borrower shall file a petition
for relief under any bankruptcy, insolvency or similar law (domestic or
foreign); or (viii) an involuntary proceeding shall be commenced or filed
against Borrower; or (ix) Borrower shall default or otherwise fail to observe or
perform in any material respect any covenant, obligation, condition or agreement
of Borrower contained herein or in any other Transaction Document, other than
those specifically set forth in this Section 4.1; or (x) Borrower shall become
delinquent in its filing requirements as a fully-reporting issuer registered
with the SEC or shall fail to timely file all required quarterly and annual
reports and any other filings that are necessary to enable Lender to sell
Conversion Shares pursuant to Rule 144; or (xi) any representation, warranty or
other statement made or furnished by or on behalf of Borrower to Lender herein,
in any Transaction Document, or otherwise in connection with the issuance of
this Note shall be false, incorrect, incomplete or misleading in any material
respect when made or furnished; or (xii) the occurrence of a Fundamental
Transaction without Lender’s prior written consent; or (xiii) Borrower shall
fail to maintain the Share Reserve as required under the Purchase Agreement; or
(xiv) Borrower effectuates a reverse split of its Common Stock without twenty
(20) Trading Days prior written notice to Lender; or (xv) any money judgment,
writ or similar process shall be entered or filed against Borrower or any
subsidiary of Borrower or any of its property or other assets for more than
$100,000, and shall remain unvacated, unbonded or unstayed for a period of
twenty (20) calendar days unless otherwise consented to by Lender; or (xvi)
Borrower shall fail to deliver to Lender original signature pages to all
Transaction Documents within five (5) Trading Days of the Purchase Price Date;
or (xvii) Borrower is not DTC Eligible.

 

4

 

 

4.2.       Remedies. Upon the occurrence of any Event of Default, Borrower shall
within three (3) Trading Days deliver written notice thereof via facsimile,
email or reputable overnight courier (with next day delivery specified) (an
“Event of Default Notice”) to Lender. At any time and from time to time after
the earlier of Lender’s receipt of an Event of Default Notice and Lender
becoming aware of the occurrence of any Event of Default, Lender may accelerate
this Note by written notice to Borrower, with the Outstanding Balance becoming
immediately due and payable in cash at the Mandatory Default Amount (as defined
hereafter). Notwithstanding the foregoing, at any time following the occurrence
of any Event of Default, Lender may, at its option, elect to increase the
Outstanding Balance by applying the Default Effect (as defined below) (subject
to the limitation set forth below) via written notice to Borrower without
accelerating the Outstanding Balance, in which event the Outstanding Balance
shall be increased as of the date of the occurrence of the applicable Event of
Default pursuant to the Default Effect, but the Outstanding Balance shall not be
immediately due and payable unless so declared by Lender (for the avoidance of
doubt, if Lender elects to apply the Default Effect pursuant to this sentence,
it shall reserve the right to declare the Outstanding Balance immediately due
and payable at any time and no such election by Lender shall be deemed to be a
waiver of its right to declare the Outstanding Balance immediately due and
payable as set forth herein unless otherwise agreed to by Lender in writing).
For purposes hereof, the “Default Effect” is calculated by multiplying the
Conversion Eligible Outstanding Balance as of the date the applicable Event of
Default occurred by (i) 15% for each occurrence of any Major Default, or (ii) 5%
for each occurrence of any Minor Default, and then adding the resulting product
to the Outstanding Balance as of the date the applicable Event of Default
occurred, with the sum of the foregoing then becoming the Outstanding Balance
under this Note as of the date the applicable Event of Default occurred;
provided that the Default Effect may only be applied three (3) times hereunder
with respect to Major Defaults and three (3) times hereunder with respect to
Minor Defaults; and provided further that the Default Effect shall not apply to
any Event of Default pursuant to Section 4.1(iii) hereof. Notwithstanding the
foregoing, upon the occurrence of any Event of Default described in clauses
(iv), (v), (vi), (vii) or (viii) of Section 4.1, the Outstanding Balance as of
the date of acceleration shall become immediately and automatically due and
payable in cash at the Mandatory Default Amount, without any written notice
required by Lender. The “Mandatory Default Amount” means the greater of (i) the
Outstanding Balance (including all Tranches, both Conversion Eligible Tranches
and Subsequent Tranches that have not yet become Conversion Eligible Tranches)
divided by the Conversion Price on the date the Mandatory Default Amount is
demanded, multiplied by the volume weighted average price (the “VWAP”) on the
date the Mandatory Default Amount is demanded, or (ii) the Default Effect. At
any time following the occurrence of any Event of Default, upon written notice
given by Lender to Borrower, interest shall accrue on the Outstanding Balance
beginning on the date the applicable Event of Default occurred at an interest
rate equal to the lesser of 22% per annum or the maximum rate permitted under
applicable law (“Default Interest”). In connection with acceleration described
herein, Lender need not provide, and Borrower hereby waives, any presentment,
demand, protest or other notice of any kind, and Lender may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by Lender at any time prior to
payment hereunder and Lender shall have all rights as a holder of the Note until
such time, if any, as Lender receives full payment pursuant to this Section 4.2.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon. Nothing herein shall limit Lender’s right
to pursue any other remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to Borrower’s failure to timely deliver Conversion Shares upon
Conversion of the Notes as required pursuant to the terms hereof. In no event
shall the Outstanding Balance increase by more than 20% pursuant to the
application of the Default Effect or Mandatory Default Amount; provided,
however, that the foregoing 20% cap shall not apply to Default Interest or
Conversion Delay Late Fees (as defined below).

 

5

 

 

4.3.       Cure for Minor Defaults. If any Minor Default is curable, then the
default may be cured (and no Event of Default will have occurred) if Borrower
cures the default within three (3) trading days of the occurrence of the Minor
Default.

 

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

 

5.       Unconditional Obligation; No Offset. Borrower acknowledges that this
Note is an unconditional, valid, binding and enforceable obligation of Borrower
not subject to offset (except as set forth in Section 18 below), deduction or
counterclaim of any kind. Borrower hereby waives any rights of offset it now has
or may have hereafter against Lender, its successors and assigns, and agrees to
make the payments or conversions called for herein in accordance with the terms
of this Note.

 

6.       Waiver. No waiver of any provision of this Note shall be effective
unless it is in the form of a writing signed by the party granting the waiver.
No waiver of any provision or consent to any prohibited action shall constitute
a waiver of any other provision or consent to any other prohibited action,
whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent or commit a party to provide a waiver or consent in the future
except to the extent specifically set forth in writing.

 

7.       Rights Upon Issuance of Securities.

 

7.1.       Subsequent Equity Sales. Except with respect to Excluded Securities,
if Borrower or any subsidiary thereof, as applicable, at any time this Note is
outstanding, shall sell or issue any Common Stock to Lender or any third party
for a price that is less than the then effective Conversion Price, then such
Conversion Price shall be automatically reduced and only reduced to equal such
lower issuance price. Except with respect to Excluded Securities, if Borrower or
any subsidiary thereof, as applicable, at any time this Note is outstanding,
shall sell or grant any option to any party to purchase, or sell or grant any
right to reprice, or issue any Common Stock, preferred shares convertible into
Common Stock, or debt, warrants, options or other instruments or securities to
Lender or any third party which are convertible into or exercisable for shares
of Common Stock (together herein referred to as “Equity Securities”), at an
effective price per share less than the then effective Conversion Price (such
issuance, together with any sale of Common Stock, is referred to herein as a
“Dilutive Issuance”), then, the Conversion Price shall be automatically reduced
and only reduced to equal such lower effective price per share. If the holder of
any Equity Securities so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options, or rights per share
which are issued in connection with such Dilutive Issuance, be entitled to
receive shares of Common Stock at an effective price per share that is less than
the Conversion Price, such issuance shall be deemed to have occurred for less
than the Conversion Price on the date of such Dilutive Issuance, and the then
effective Conversion Price shall be reduced and only reduced to equal such lower
effective price per share. Such adjustments described above to the Conversion
Price shall be permanent (subject to additional adjustments under this section),
and shall be made whenever such Common Stock or Equity Securities are issued.
Borrower shall notify Lender, in writing, no later than the Trading Day
following the issuance of any Common Stock or Equity Securities subject to this
Section 7.1, indicating therein the applicable issuance price, or applicable
reset price, exchange price, conversion price, or other pricing terms (such
notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether
or not Borrower provides a Dilutive Issuance Notice pursuant to this Section
7.1, upon the occurrence of any Dilutive Issuance, on the date of such Dilutive
Issuance the Conversion Price shall be lowered to equal the applicable effective
price per share regardless of whether Borrower or Lender accurately refers to
such lower effective price per share in any Conversion Notice.

 

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7.2.       Adjustment of Conversion Price upon Subdivision or Combination of
Common Stock. Without limiting any provision hereof, if Borrower at any time on
or after the Effective Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price and
Conversion Price Floor in effect immediately prior to such subdivision will be
proportionately reduced. Without limiting any provision hereof, if Borrower at
any time on or after the Effective Date combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price and Conversion Price
Floor in effect immediately prior to such combination will be proportionately
increased. Any adjustment pursuant to this Section 7.2 shall become effective
immediately after the effective date of such subdivision or combination. If any
event requiring an adjustment under this Section 7.2 occurs during the period
that a Conversion Price is calculated hereunder, then the calculation of such
Conversion Price shall be adjusted appropriately to reflect such event.

 

7.3.       Other Events. In the event that Borrower (or any subsidiary) shall
take any action to which the provisions of this Section 7 are not strictly
applicable, or, if applicable, would not operate to protect Lender from dilution
or if any event occurs of the type contemplated by the provisions of this
Section 7 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then Borrower’s board of directors shall in
good faith determine and implement an appropriate adjustment in the Conversion
Price so as to protect the rights of Lender, provided that no such adjustment
pursuant to this Section 7.3 will increase the Conversion Price as otherwise
determined pursuant to this Section 7, provided further that if Lender does not
accept such adjustments as appropriately protecting its interests hereunder
against such dilution, then Borrower’s board of directors and Lender shall
agree, in good faith, upon an independent investment bank of nationally
recognized standing to make such appropriate adjustments, whose determination
shall be final and binding and whose fees and expenses shall be borne by
Borrower.

 

8.       Method of Conversion Share Delivery. On or before the close of business
on the third (3rd) Trading Day following the date of delivery of a Conversion
Notice or on the Amortization Payment Date for an Amortization Conversion (the
“Delivery Date”), Borrower shall deliver to Lender or its broker (as designated
in the Conversion Notice, as applicable), via reputable overnight courier, a
certificate representing the number of shares of Common Stock equal to the
number of Conversion Shares to which Lender shall be entitled, registered in the
name of Lender or its designee. For the avoidance of doubt, Borrower has not met
its obligation to deliver Conversion Shares by the Delivery Date unless Lender
or its broker, as applicable, has actually received the certificate representing
the applicable Conversion Shares no later than the close of business on the
relevant Delivery Date pursuant to the terms set forth above.

 

7

 

 

9.       Conversion Delays. If Borrower fails to deliver Conversion Shares in
accordance with the timeframes stated in Sections 3 and 8, Lender, at any time
prior to selling all of those Conversion Shares, may rescind in whole or in part
that particular Conversion attributable to the unsold Conversion Shares with a
corresponding increase to the Outstanding Balance as set forth in this Note (any
returned Conversion Amount will tack back to the Purchase Price Date for
purposes of determining the holding period under Rule 144). In addition, for
each Conversion pursuant to Section 3, in the event that Conversion Shares are
not delivered by the fourth Trading Day (inclusive of the day of the
Conversion), a late fee equal to the greater of (a) $500.00 per day and (b) 2%
of the applicable Conversion Share Value rounded to the nearest multiple of
$100.00 (but in any event the cumulative amount of such late fees for each
Conversion shall not exceed 200% of the applicable Conversion Share Value) will
be assessed for each day after the third Trading Day (inclusive of the day of
the Conversion) until Conversion Share delivery is made; and such late fee will
be added to the Outstanding Balance (such fees, the “Conversion Delay Late
Fees”). For illustration purposes only, if Lender delivers a Conversion Notice
to Borrower pursuant to which Borrower is required to deliver 100,000 Conversion
Shares to Lender and on the Delivery Date such Conversion Shares have a
Conversion Share Value of $20,000.00 (assuming a VWAP on the Delivery Date of
$0.20 per share of Common Stock), then in such event a Conversion Delay Late Fee
in the amount of $500.00 per day (the greater of $500.00 per day and $20,000.00
multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of
the Note until such Conversion Shares are delivered to Lender. For purposes of
this example, if the Conversion Shares are delivered to Lender twenty (20) days
after the applicable Delivery Date, the total Conversion Delay Late Fees that
would be added to the Outstanding Balance would be $10,000.00 (20 days
multiplied by $500.00 per day). If the Conversion Shares are delivered to Lender
one hundred (100) days after the applicable Delivery Date, the total Conversion
Delay Late Fees that would be added to the Outstanding Balance would be
$40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the
Conversion Share Value).

 

10.       Ownership Limitation. Notwithstanding anything to the contrary
contained in this Note or the other Transaction Documents, if at any time Lender
shall or would be issued shares of Common Stock under any of the Transaction
Documents, but such issuance would cause Lender (together with its affiliates)
to beneficially own a number of shares exceeding 4.99% of the number of shares
of Common Stock outstanding on such date (including for such purpose the shares
of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then
Borrower must not issue to Lender shares of the Common Stock which would exceed
the Maximum Percentage. For purposes of this section, beneficial ownership of
Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The
shares of Common Stock issuable to Lender that would cause the Maximum
Percentage to be exceeded are referred to herein as the “Ownership Limitation
Shares”. Borrower will reserve the Ownership Limitation Shares for the exclusive
benefit of Lender. From time to time, Lender may notify Borrower in writing of
the number of the Ownership Limitation Shares that may be issued to Lender
without causing Lender to exceed the Maximum Percentage. Upon receipt of such
notice, Borrower shall be unconditionally obligated to immediately issue such
designated shares to Lender, with a corresponding reduction in the number of the
Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%”
above shall be replaced with “9.99%” at such time as the Market Capitalization
of the Common Stock is less than $10,000,000.00. Notwithstanding any other
provision contained herein, if the term “4.99%” is replaced with “9.99%”
pursuant to the preceding sentence, such increase to “9.99%” shall remain at
9.99% until increased, decreased or waived by Lender as set forth below. By
written notice to Borrower, Lender may increase, decrease or waive the Maximum
Percentage as to itself but any such waiver will not be effective until the 61st
day after delivery thereof. The foregoing 61-day notice requirement is
enforceable, unconditional and non-waivable and shall apply to all affiliates
and assigns of Lender.

 

8

 

 

11.       Payment of Collection Costs. If this Note is placed in the hands of an
attorney for collection or enforcement prior to commencing arbitration or legal
proceedings, or is collected or enforced through any arbitration or legal
proceeding, or Lender otherwise takes action to collect amounts due under this
Note or to enforce the provisions of this Note, then Borrower shall pay the
costs incurred by Lender for such collection, enforcement or action including,
without limitation, attorneys’ fees and disbursements. Borrower also agrees to
pay for any costs, fees or charges of its transfer agent that are charged to
Lender pursuant to any Conversion or issuance of shares pursuant to this Note.

 

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

 

13.       Governing Law. This Note shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Note shall be governed by, the internal laws of the
State of California, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of California or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of California. The provisions set forth in the Purchase
Agreement to determine the proper venue for any disputes are incorporated herein
by this reference.

 

14.       Resolution of Disputes.

 

14.1.        Arbitration of Disputes. By its acceptance of this Note, each party
agrees to be bound by the Arbitration Provisions set forth as Exhibit G to the
Purchase Agreement.

 

14.2.        Calculation Disputes. Notwithstanding the Arbitration Provisions,
in the case of a dispute as to any Calculations (as defined in the Purchase
Agreement), such dispute will be resolved in the manner set forth in the
Purchase Agreement.

 

15.       Cancellation. After repayment or conversion of the entire Outstanding
Balance this Note shall be deemed paid in full, shall automatically be deemed
canceled, and shall not be reissued.

 

16.       Amendments. The prior written consent of both parties hereto shall be
required for any change or amendment to this Note.

 

17.       Assignments. Borrower may not assign this Note without the prior
written consent of Lender. This Note and any shares of Common Stock issued upon
conversion of this Note may be offered, sold, assigned or transferred by Lender
without the consent of Borrower.

 

18.       Offset Rights. Notwithstanding anything to the contrary herein or in
any of the other Transaction Documents, (a) the parties hereto acknowledge and
agree that Lender maintains a right of offset pursuant to the terms of the
Investor Note that, under certain circumstances, permits Lender to deduct
amounts owed by Borrower under this Note from amounts otherwise owed by Lender
under the Investor Note (the “Lender Offset Right”), and (b) in the event of the
occurrence of any Investor Note Default (as defined in the Investor Note), or at
any other time, Borrower shall be entitled to deduct and offset any amount owing
by the initial Lender under the Investor Note from any amount owed by Borrower
under this Note (the “Borrower Offset Right”). In order to exercise the Borrower
Offset Right, Borrower must deliver to Lender (i) a completed and signed
Borrower Offset Right notice, and (ii) the original Investor Note being offset
marked “cancelled” or, in the event the applicable Investor Note has been lost,
stolen or destroyed, a lost note affidavit in a form reasonably acceptable to
Lender. In the event that Borrower’s exercise of the Borrower Offset Right
results in the full satisfaction of Borrower’s obligations under this Note,
Lender shall return the original Note to Borrower marked “cancelled” or, in the
event this Note has been lost, stolen or destroyed, a lost note affidavit in a
form reasonably acceptable to Borrower. For the avoidance of doubt, Borrower
shall not incur any Prepayment Premium set forth in Section 1 hereof with
respect to any portions of this Note that are satisfied by way of a Borrower
Offset Right.

 

9

 

 

19.       Time of the Essence. Time is expressly made of the essence with
respect to each and every provision of this Note and the documents and
instruments entered into in connection herewith.

 

20.       Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
the subsection of the Purchase Agreement entitled “Notices.”

 

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

 

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

 

10

 

 

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

 

  BORROWER:        

Vape Holdings, Inc.

        By:     Name: Kyle Tracey   Title: Chief Executive Officer

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Redwood Management, Llc

            By:         John DeNobile, Manager  

 

[Signature Page to Unsecured Convertible Promissory Note]

 

 

 

ATTACHMENT 1
DEFINITIONS

 

For purposes of this Note, the following terms shall have the following
meanings:

 

A1       “Amortization Conversion Rate” means the lower of the Conversion Price
or 70% of the lowest daily VWAP in the ten (10) Trading Days immediately
preceding the applicable Amortization Payment Date.

 

A2       “Approved Stock Plan” means any stock option plan which has been
approved by the board of directors of Borrower, pursuant to which Borrower’s
securities may be issued to any employee, officer or director for services
provided to Borrower.

 

A3       “Common Stock” means the Company’s common stock, $0.00001 par value per
share.

 

A4       “Conversion Eligible Outstanding Balance” means the Outstanding Balance
of this Note less the sum of the outstanding balances of each Subsequent Tranche
that has not yet become a Conversion Eligible Tranche (i.e., Lender has not yet
paid the outstanding balance of the Investor Note that corresponds to such
Subsequent Tranche).

 

A5       “Conversion Share Value” means the product of the number of Conversion
Shares deliverable pursuant to any Conversion multiplied by the VWAP of the
Common Stock on the Delivery Date for such Conversion.

 

A6       “Conversion Shares” means fully paid and non-assessable shares of the
Common Stock issued pursuant to Section 2 or Section 3 of this Note.

 

A7       “DTC” means the Depository Trust Company.

 

A8       “DTC Eligible” means, with respect to the Common Stock, that such
Common Stock is eligible to be deposited in certificate form at the DTC, cleared
and converted into electronic shares by the DTC and held in the name of the
clearing firm servicing Lender’s brokerage firm for the benefit of Lender.

 

A9       “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer
Program.

 

A10       Equity Conditions” means, during the period in question, (a) Borrower
shall have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of Lender, if any, (b)
Borrower shall have paid all liquidated damages and other amounts owing to
Lender in respect of this Note, (c) all of the Conversion Shares issuable
pursuant to the Transaction Documents (and shares issuable in lieu of cash
payments of interest) may be resold pursuant to Rule 144 without volume or
manner-of-sale restrictions as determined by the counsel to Borrower as set
forth in a written opinion letter to such effect, addressed and acceptable to
the Transfer Agent and Lender, (d) the Common Stock is trading on a Trading
Market and all of the shares issuable pursuant to the Transaction Documents are
listed or quoted for trading on such Trading Market (and Borrower believes, in
good faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (e) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares then issuable pursuant to the Transaction
Documents, (f) there is no existing Event of Default and no existing event
which, with the passage of time or the giving of notice, would constitute an
Event of Default, (g) the issuance of the shares in question to Lender would not
violate the limitations set forth in Section 10 herein, (h) there has been no
public announcement of a pending or proposed Fundamental Transaction or Change
of Control Transaction that has not been consummated, (i) the applicable Lender
is not in possession of any information provided by Borrower that constitutes,
or may constitute, material non-public information, (j) for each Trading Day in
a period of 10 consecutive Trading Days prior to the applicable date in
question, the daily dollar trading volume for the Common Stock on the principal
Trading Market exceeds $20,000 per Trading Day, (i) Borrower’s Common Stock must
be DTC and DWAC Eligible and not subject to a “DTC Chill” and (j) Borrower has
timely filed (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by Borrower after the
date hereof pursuant to the Exchange Act.

 

A11     “Excluded Securities” means any (a) shares of Common Stock or options to
employees, officers, consultants or directors of Borrower pursuant to an
Approved Stock Plan duly adopted for such purpose, by the Board of Directors,
(b) securities issued pursuant to acquisitions or strategic transactions,
provided that any such issuance shall only be to a Person (or to the
equityholders of a Person) which is, itself or through its subsidiaries, an
operating company or an owner of an asset in a business synergistic with the
business of Borrower and shall provide to Borrower additional benefits in
addition to the investment of funds, but shall not include a transaction in
which Borrower is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities, (c)
securities issued for consideration other than cash pursuant to a merger,
consolidation, acquisition, or similar business combination approved by the
Board of Directors, (d) securities issued pursuant to an equipment loan or
leasing arrangement, real property leasing arrangement or debt financing from a
bank or similar financial institution approved by the Board of Directors, and
(e) securities with respect to which the holders of the majority of the
outstanding principal under this Note have waived their anti-dilution rights in
writing.

 

Attachment 1 to Unsecured Convertible Promissory Note, Page 1 

 

 

 

A12     “Fundamental Transaction” means that (y) (i) Borrower or any of its
subsidiaries shall, directly or indirectly, in one or more related transactions,
consolidate or merge with or into (whether or not Borrower or any of its
subsidiaries is the surviving corporation) any other person or entity, or (ii)
Borrower or any of its subsidiaries shall, directly or indirectly, in one or
more related transactions, sell, lease, license, assign, transfer, convey or
otherwise dispose of all or substantially all of its respective properties or
assets to any other person or entity, or (iii) Borrower or any of its
subsidiaries shall, directly or indirectly, in one or more related transactions,
allow any other person or entity to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of
voting stock of Borrower (not including any shares of voting stock of Borrower
held by the person or persons making or party to, or associated or affiliated
with the persons or entities making or party to, such purchase, tender or
exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, consummate a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with any
other person or entity whereby such other person or entity acquires more than
50% of the outstanding shares of voting stock of Borrower (not including any
shares of voting stock of Borrower held by the other persons or entities making
or party to, or associated or affiliated with the other persons or entities
making or party to, such stock or share purchase agreement or other business
combination), or (v) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, reorganize, recapitalize or
reclassify the Common Stock, other than an increase in the number of authorized
shares of Borrower’s Common Stock, or (z) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the
rules and regulations promulgated thereunder) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding
voting stock of Borrower.

 

A13     “Major Default” means any Event of Default occurring under Sections
4.1(i), (ii), (x), or (xiii) of this Note.

 

A14     “Market Capitalization of the Common Stock” shall mean the product equal
to (a) the average VWAP of the Common Stock for the immediately preceding
fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding
shares of Common Stock as reported on Borrower’s most recently filed Form 10-Q
or Form 10-K.

 

A15     “Minor Default” means any Event of Default that is not a Major Default.

 

A16     “Optional Prepayment Liquidated Damages Amount” means an amount equal to
the difference between (a) the product of (i) the number of shares of Common
Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2)
the Conversion Price as of the date Borrower delivered the applicable Optional
Prepayment Amount to Lender, multiplied by (ii) the VWAP of the Common Stock on
the date Borrower delivered the applicable Optional Prepayment Amount to Lender,
and (b) the applicable Optional Prepayment Amount paid by Borrower to Lender.
For illustration purposes only, if the applicable Optional Prepayment Amount
were $50,000.00, the Conversion Price as of the date the Optional Prepayment
Amount was paid to Lender was equal to $0.75 per share of Common Stock, and the
VWAP of a share of Common Stock as of such date was equal to $1.00, then the
Optional Prepayment Liquidated Damages Amount would equal $16,666.67 computed as
follows: (a) $66,666.67 (calculated as (i) (1) $50,000.00 divided by (2) $0.75
multiplied by (ii) $1.00) minus (b) $50,000.00.

 

A17     “Trading Day” shall mean any day on which the Common Stock is traded or
tradable for any period on the Common Stock’s principal market, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.

  

Attachment 1 to Unsecured Convertible Promissory Note, Page 2

 

 

 

EXHIBIT A

 

Redwood Management, LLC

16850 Collins Avenue, Suite 112-341
Sunny Isles, Florida, 33160

 

Vape Holdings, Inc.

Attn: Kyle Tracey

21822 Lassen Street, Suite A Chatsworth, California 91311

Date:                           

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to Vape Holdings, Inc., a
Delaware corporation (the “Borrower”), pursuant to that certain Unsecured
Convertible Promissory Note made by Borrower in favor of Lender on February 10,
2015 (the “Note”), that Lender elects to convert the portion of the Note balance
set forth below into fully paid and non-assessable shares of Common Stock of
Borrower as of the date of conversion specified below. Said conversion shall be
based on the Conversion Price set forth below. In the event of a conflict
between this Conversion Notice and the Note, the Note shall govern, or, in the
alternative, at the election of Lender in its sole discretion, Lender may
provide a new form of Conversion Notice to conform to the Note. Capitalized
terms used in this notice without definition shall have the meanings given to
them in the Note.

 

  A. Date of Conversion:                            B.  Conversion #:
                           C. Conversion Amount:                            D.
Conversion Price:                            E. Conversion Shares:
                         (C divided by D)   F. Remaining Outstanding Balance of
Note:                         *

 

* Subject to adjustments for corrections, defaults, interest and other
adjustments permitted by the Transaction Documents (as defined in the Purchase
Agreement), the terms of which shall control in the event of any dispute between
the terms of this Conversion Notice and such Transaction Documents.

 

                                                                      

 

                                                                      

 

                                                                      

 

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

 

Sincerely,

 

Lender:

 

Redwood Management, LLC

 

  By:         John DeNobile, Manager  

 

 

Exhibit A to Unsecured Convertible Promissory Note, Page 1

 

 

 

EXHIBIT B

 

AMORTIZATION SCHEDULE

 

Amortization Payments Cash (25% Premium) Common Stock First Payment (8/1/15)
1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Second Payment (8/15/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Third Payment (9/1/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Fourth payment (9/15/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Fifth Payment (10/1/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Sixth Payment (10/15/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Seventh Payment (11/1/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Eighth Payment (11/15/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Ninth Payment (12/1/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Tenth Payment (12/15/15) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Eleventh Payment (1/1/16) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest) Twelfth Payment (1/15/16) 1/12 of the Outstanding Balance
(plus interest) * 125% 1/12 of the Outstanding Balance
(plus interest)

 

 

Exhibit B to Unsecured Convertible Promissory Note, Page 1