Exhibit 10.3
 
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).
 
SECOND REPLACEMENT DEBENTURE B
 
$2,681,209.82  Issuance and Effective Date: as of April 30, 2016
 
FOR VALUE RECEIVED, GROWLIFE, INC., a Delaware corporation (the “Borrower”),
whose address is 500 Union Street, Suite 810, Seattle, WA 98101, 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, TWO MILLION SIX HUNDRED EIGHTY-ONE THOUSAND TWO
HUNDRED NINE AND 82/100 DOLLARS ($2,681,209.82), 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 even date
herewith (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.
 
 
1

 
 
This Second Replacement Debenture B (“Debenture”), along with the Second
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 existing Amended, Restated, and Consolidated Senior Secured,
Convertible, Redeemable Debenture dated as of October 16, 2015, but made
effective as of October 27, 2015, as well as that certain Senior Secured,
Convertible, Redeemable Debenture dated as of April 30, 2015, but made effective
as of August 6, 2015 (collectively, the “Existing Debentures”), in their
entirety. It is the intention of the Borrower and Lender that while this
Debenture and Debenture A replace and supersede the Existing Debentures, in
their entirety, it is not in payment or satisfaction of the Existing Debentures,
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 Debentures or constitute a novation of the indebtedness evidenced by
the Existing Debentures.
 
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.
 
 
2

 
 
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.
 
 
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(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.
 
 
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(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.
 
 
5

 
 
(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.
 
 
6

 
 
(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.
 
 
7

 
 
(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]
 
 
8

 
 
IN WITNESS WHEREOF, the Borrower has executed this Debenture as of the date set
forth above.
 
BORROWER:
 
GROWLIFE, INC., a Delaware corporation
 
 
By:            /s/ Marco Hegyi
Name:       Marco Hegyi
Title:         Chief Executive Officer
 
 
 
 
 
9

 
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: _________________________
 
  __________________________
 
  __________________________
 
 
 
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