Exhibit 10.2


 


CONVERTIBLE
PROMISSORY NOTE


 


	Effective
    Date: November 1, 2016	U.S.
    $1,413,000.00




 


FOR
VALUE RECEIVED, Vape Holdings, Inc., a Delaware corporation ("Borrower"),
promises to pay to Typenex Co-Investment, LLC, a Utah limited liability company,
or its successors or assigns ("Lender"), $1,413,000.00 and any interest, fees, charges, and late fees on the
date that is nine (9) months after the Purchase Price Date (the "Maturity Date") in accordance with the terms
set forth herein and to pay interest on the Outstanding Balance (including all Tranches (as defined below), both Conversion Eligible
Tranches (as defined below) and Subsequent Tranches (as defined below) that have not yet become Conversion Eligible Tranches)
at the rate of ten percent (10%) per annum from the Purchase Price Date until the same is paid in full. This Convertible Promissory
Note (this "Note") is issued and made effective as of November 1, 2016 (the "Effective Date").
This Note is issued pursuant to that certain Securities Purchase Agreement dated November 1, 2016, as the same may be amended
from time to time, by and between Borrower and Lender (the "Purchase Agreement"). All interest calculations hereunder
shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall
be payable in accordance with the terms of this Note. Certain capitalized terms used herein are defined in Attachment 1
attached hereto and incorporated herein by this reference.


 


This
Note carries an OID of $128,000.00. In addition, Borrower agrees to pay $5,000.00 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 $1,280,000.00 (the "Purchase Price"), computed as follows: $1,413,000.00
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 Secured Investor Notes (as defined in the Purchase Agreement) and a wire transfer of immediately
available funds in the amount of the Initial Cash Purchase Price (as defined in the Purchase Agreement). This Note shall be comprised
of sixteen (16) tranches (each, a "Tranche"), consisting of (i) an initial Tranche in an amount equal to $49,000.00
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) fifteen (15) additional Tranches,
the first of which will be in the amount of $44,000.00, the next four (4) of which will be in the amount of $55,000.00, and the
next ten (10) of which will be in the amount of $110,000.00, 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, $4,000.00 of the OID and the Transaction Expense Amount,
and may be converted into shares of Common Stock (as defined below) any time subsequent to the Purchase Price Date. The first
Subsequent Tranche shall correspond to Secured Investor Note #1 and $4,000.00 of the OID, the second Subsequent Tranche shall
correspond to Secured Investor Note #2 and $5,000.00 of the OID, the third Subsequent Tranche shall correspond to Secured Investor
Note #3 and $5,000.00 of the OID, the fourth Subsequent Tranche shall correspond to Secured Investor Note #4 and $5,000.00 of
the OID, the fifth Subsequent Tranche shall correspond to Secured Investor Note #5 and $5,000.00 of the OID, the sixth Subsequent
Tranche shall correspond to Secured Investor Note #6 and $10,000.00 of the OID, the seventh Subsequent Tranche shall correspond
to Secured Investor Note #7 and $10,000.00 of the OID, the eighth Subsequent Tranche shall correspond to Secured Investor Note
#8 and $10,000.00 of the 0113, the ninth Subsequent Tranche shall correspond to Secured Investor Note #9 and $10,000.00 of the
OID, the tenth Subsequent Tranche shall correspond to Secured Investor Note #10 and $10,000.00 of the OID, the eleventh Subsequent
Tranche shall correspond to Secured Investor Note #11 and $10,000.00 of the OID, the twelfth Subsequent Tranche shall correspond
to Secured Investor Note #12 and $10,000.00 of the OID, the thirteenth Subsequent Tranche shall correspond to Secured Investor
Note #13 and $10,000.00 of the OM, the fourteenth Subsequent Tranche shall correspond to Secured Investor Note #14 and
$10,000.00 of the OID, and the fifteenth Subsequent Tranche shall correspond to Secured Investor Note #15 and $10,000.00 of the
OID. Lender's right to convert any portion of any of the Subsequent Tranches is conditioned upon Lender's payment in full of the
Secured Investor Note corresponding to such Subsequent Tranche (upon the satisfaction of such condition, such Subsequent Tranche
becomes a "Conversion Eligible Tranche"). In the event Lender exercises its Lender Offset Right (as defined below)
with respect to a portion of an Secured Investor Note and pays in full the remaining outstanding balance of such Secured Investor
Note, the Subsequent Tranche that corresponds to such Secured Investor Note shall be deemed to be a Conversion Eligible Tranche
only for the portion of such Tranche that was paid for in cash by Lender and the portion of such Secured Investor Note that was
offset pursuant to Lender's exercise of the Lender Offset Right shall not be included in the applicable 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 lowest-numbered
Conversion Eligible Tranche and Conversion Eligible Tranches may be converted (or redeemed, as applicable) in one or more separate
Conversions (as defined below), as determined in Lender's sole discretion. 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 lowest-numbered then-current
Conversion Eligible Tranche.


 






     


     


    

 


1. Payment;
Prepayment.


 


1.1. 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 or bank account 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.


 


1.2. Prepayment.
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 and regardless of whether or not cured), 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: (i) that Borrower is exercising its right to prepay this Note,
and (ii) 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 equal to 125% (the "Prepayment
Premium") multiplied by the then Outstanding Balance of this Note (the "Optional Prepayment Amount").
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 and Lender shall. be entitled to exercise its conversion rights set forth herein during
such five (5) day period. 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. Security.
This Note is unsecured.


 


3. Conversion.


 


3.1. 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 is referred to herein as a "Conversion") all or any part of the Outstanding
Balance into shares ("Conversion Shares") of fully paid and non-assessable common stock, $0.00001 par value per
share ("Common Stock"), of Borrower as per the following conversion formula: the number of Conversion Shares
equals the amount being converted (the "Conversion Amount") divided by the Conversion Price (as defined below).
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 7 below.


 


3.2. Conversion
Price. Subject to the adjustments set forth herein, the conversion price (the "Conversion Price") for each
Conversion (as defined below) shall be equal to 55% (the "Conversion Factor") multiplied by the lowest intra-day
trade price in the twenty (20) Trading Days immediately preceding the applicable Conversion, provided that if at any time the
lowest intra-day trade price in the twenty (20) Trading Days immediately preceding any date of measurement is below $0.0025, then
in such event the then-current Conversion Factor shall be reduced by 10% for all future Conversions (subject to other reductions
set forth in this section). 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 55% to 50% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major Default pursuant
to Section 4.1(a), 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.


 






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4. Defaults
and Remedies.


 


4.1. Defaults.
The following are events of default under this Note (each, an "Event of Default"): (a) Borrower fails to pay
any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any
Conversion Shares in accordance with the terms hereof; (c) 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; (d) Borrower becomes 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; (e) Borrower makes a general
assignment for the benefit of creditors; (f) Borrower files a petition for relief under any bankruptcy, insolvency or similar
law (domestic or foreign); (g) an involuntary bankruptcy proceeding is commenced or filed against Borrower; (h) Borrower defaults
or otherwise fails to observe or perform 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 and Section 4 of the Purchase Agreement;
(i) 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 is false, incorrect, incomplete or misleading in any material
respect when made or furnished; (j) the occurrence of a Fundamental Transaction without Lender's prior written consent (unless
this Note is paid in full with the proceeds of such Fundamental Transaction); (k) Borrower fails to establish or maintain the
Share Reserve as required under the Purchase Agreement; (1) any money judgment, writ or similar process is entered or filed against
Borrower or any subsidiary of Borrower or any of its property or other assets for more than $200,000.00, and shall remain unvacated,
unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; (in), Borrower's
Common Stock fails to be DTC Eligible; (n) Borrower fails to observe or perform any covenant set forth in Section 4 of the Purchase
Agreement, or (o) Borrower breaches any covenant or other term or condition contained in any Other Agreements. Notwithstanding
the foregoing, upon the occurrence of an event described in Section 4.1(a) or 4.1(b) above, such event shall not be considered
an Event of Default if such event is cured within three (3) Trading Days of the occurrence of such event; provided, however,
that the foregoing cure period shall only apply to the first two occurrences of the events described in Section 4.1(a) or
4.1(b) and not to any subsequent occurrences of such events. In addition, upon the occurrence of an event described in Section
4.1(c) — 4.1(p) above, such event shall not be considered an Event of Default if such event is cured within twenty (20)
Trading Days of the occurrence of such event.


 






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4.2. Remedies.
At any time and from time to time after Lender becomes 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. 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 (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). Notwithstanding the foregoing, upon the occurrence of any Event of Default described in
clauses (c), (d), (e), (f) or (g) 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. 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"). For the avoidance of doubt, Lender may continue making Lender Conversions at any time
following an Event of Default until such time as the Outstanding Balance is paid in full. Borrower further acknowledges and
agrees that Lender may continue making Conversion following the entry of any judgment or arbitration award in favor of
Lender until such time that the entire judgment amount or arbitration award is paid in full. Borrower agrees that any
judgment or arbitration award will, by its terms, be made convertible into Common Stock. Any Conversions made following a
judgment or arbitration award shall be made pursuant to the following formula: the amount of the judgment or arbitration
award being converted divided by 80% of the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the
date of Conversion. In such event, Borrower and Lender agree that it is their expectation that any such judgment amount or
arbitration award that is converted will tack back to the Purchase Price Date for purposes of determining the holding period
under Rule 144. Borrower and Lender agree and stipulate that any judgment or arbitration award entered against Borrower shall
be reduced by $1,000.00 and such $1,000.00 shall become the new Outstanding Balance of this Note and this Note shall
expressly survive such judgment or arbitration award. Additionally, following the occurrence of any Event of Default,
Borrower may, at its option, pay any Conversion in cash instead of Conversion Shares by paying to Lender on or before the
applicable Delivery Date (as defined below) a cash amount equal to the number of Conversion Shares set forth in the
applicable Conversion Notice multiplied by the highest intra-day trading price of the Common Stock that occurs during the
period beginning on the date the applicable Event of Default occurred and ending on the date of the applicable Conversion
Notice. 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.


 


4.3. 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 17 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.


 


5. 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.


 


6. Rights
Upon Issuance of Securities.


 


6.1. 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 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 in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this Section 6.1 shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment under this Section 6.1 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.


 






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6.2. Other
Events. In the event that Borrower (or any subsidiary) shall take any action to which the provisions hereof 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 6 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 6.2 will increase the Conversion Price as otherwise determined pursuant
to this Section 6, 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.


 


7. 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 (the "Delivery Date"), Borrower shall deliver or cause to be delivered to
Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate or certificates
representing the aggregate 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. Moreover, and notwithstanding
anything to the contrary herein or in any other Transaction Document, in the event Borrower or its transfer agent refuses to deliver
any Conversion Shares to Lender on grounds that such issuance is in violation of Rule 144 under the Securities Act of 1933, as
amended ("Rule 144"), Borrower shall deliver or cause its transfer agent to deliver the applicable Conversion
Shares to Lender with a restricted securities legend, but otherwise in accordance with the provisions of this Section 7. In conjunction
therewith, Borrower will also deliver to Lender a written opinion from its counsel or its transfer agent's counsel opining as
to why the issuance of the applicable Conversion Shares violates Rule 144.


 


8. Conversion
Delays. If Borrower fails to deliver Conversion Shares in accordance with the timeframe stated in Section 7, 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 (any returned amount will tack back
to the Purchase Price Date for purposes of determining the holding period under Rule 144). In addition, for each Conversion, 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 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 Closing Trade Price 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).


 



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9. 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 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 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.


 


10. 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.


 


11. 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.


 


12. Governing
Law; Venue. 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 Utah, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase Agreement
to determine the proper venue for any disputes are incorporated herein by this reference.


 






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13.
Resolution of Disputes.


 


13.1.
Arbitration of Disputes. By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions (as
defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.


 


13.2.
Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculation (as defined
in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.


 


14. 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.


 


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


 


16. 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.


 


17. 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 Secured Investor Notes that, under
certain circumstances, permits Lender to deduct amounts owed by Borrower under this Note from amounts otherwise owed by Lender
under the Secured Investor Notes (the "Lender Offset Right"), and (b) at any time Borrower shall be entitled
to deduct and offset any amount owing by the initial Lender under the Secured Investor Notes 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 (a) a completed and signed Borrower Offset Right Notice in the form attached hereto as Exhibit B, (b)
the original Secured Investor Note being offset marked "cancelled" or, in the event the applicable Secured Investor
Note has been lost, stolen or destroyed, a lost note affidavit in a form reasonably acceptable to Lender, and (c) a check payable
to Lender in the amount of $250.00. 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.


 


18. Time
is 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.


 


19. 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 titled "Notices."


 


20. 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 Purchase Price Date for purposes of determining the holding period under
Rule 144).


 






    	 	8	 



     


    

 


21. Waiver
of Jury Trial. EACH OF LENDER AND BORROWER 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 NOTE OR THE RELATIONSHIPS OF THE PAR ALES 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.


 


22. Voluntary
Agreement. Borrower has carefully read this Note and has asked any questions needed for Borrower to understand the terms,
consequences and binding effect of this Note and fully understand them. Borrower has had the opportunity to seek the advice of
an attorney of Borrower's choosing, or has waived the right to do so, and is executing this Note voluntarily and without any duress
or undue influence by Lender or anyone else.


 


23. Severability.
If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower
and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.


 





 


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


 



    9


     


    

 


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


 


	 	BORROWER:
	 	 	 
	 	Vape
    Holdings, Inc.
	 	 	 
	 	By:	                      
	 	Name:	 
	 	Title:	 


 


ACKNOWLEDGED,
ACCEPTED AND AGREED:


 


LENDER:


 


Typenex
Co-Investment, LLC


 


By:
Red Cliffs Investments, Inc., its Manager


 


	By:	      	 
	 	John
    M. Fife, President	 


 


 


[Signature Page
to Convertible Promissory Note]


 



     


     


    

 


ATTACHMENT
1

DEFINITIONS


 


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


 


A1."Bloomberg"
means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable
reporting service of national reputation selected by Lender and reasonably satisfactory to Borrower).


 


A2."Closing
Bid Price" and "Closing Trade Price" means the last closing bid price and last closing trade price,
respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate
on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the
last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing
bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where
the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or
last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common
Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported
by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated
for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as
the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Lender and Borrower.
If Lender and Borrower are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved
in accordance with the procedures in Section 13.2. All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such period.


 


A3."Conversion
Eligible Outstanding Balance" means the Outstanding Balance of this Note less the sum 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 Secured Investor
Note that corresponds to such Subsequent Tranche).


 


A4."Default
Effect" means multiplying the Conversion Eligible Outstanding Balance as of the date the applicable Event of Default
occurred by (a) 15% for each occurrence of any Major Default, or (b) 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(b) hereof.


 


A5."DTC"
means the Depository Trust Company or any successor thereto.


 


A6."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.


 


A7."Fundamental
Transaction" means that (a) (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 (b) 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.


  



    Attachment 1 to Secured Convertible Promissory Note, Page 1


     

    

 


A8."Major
Default" means any Event of Default occurring under Sections 4.1(a), 4.1(k), or 4.1(n) of this Note.


 


A9."Mandatory
Default Amount" means the greater of (a) 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 VWAP on the date the Mandatory Default Amount is demanded, or (b) the
Outstanding Balance following the application of the Default Effect.


 


A10."Market
Capitalization" means a number 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.


 


A11.
"Minor Default" means any Event of Default that is not a Major Default.


 


A12."OID"
means an original issue discount.


 


A13."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 Closing Trade Price 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 Closing Trade Price 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.


 


A14."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.


 


A15."Outstanding
Balance" means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant
to the terms hereof for payment, Conversion, offset, or otherwise, plus the OID, the Transaction Expense Amount, 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, and any other fees or charges (including without limitation Conversion Delay Late Fees)
incurred under this Note.


 


A16."Purchase
Price Date" means the date the Initial Cash Purchase Price is delivered by Lender to Borrower.


 


A17."Trading
Day" means any day on which the New York Stock Exchange is open for trading.


 


A18."VWAP"
means the volume weighted average price of the Common stock on the principal market for a particular Trading Day or set of
Trading Days, as the case may be, as reported by Bloomberg.





 



    Attachment 1 to Secured Convertible Promissory Note, Page 2


     

    

 


EXHIBIT A


 


Typenex
Co-Investment, LLC


303
East Wacker Drive, Suite 1040

Chicago, Illinois 60601


 





	Vape Holdings,
    Inc.	Date: ______________




Attn: Kyle Tracey, CEO


5304 Derry Avenue, Suite C


Agoura Hills,
California 91301


 


CONVERSION
NOTICE


 


The
above-captioned Lender hereby gives notice to Vape Holdings, Inc., a Delaware corporation (the "Borrower"), pursuant
to that certain Convertible Promissory Note made by Borrower in favor of Lender on November 1, 2016 (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: ___________*






		G.	Remaining
                                         Balance of Secured Investor Notes:_________*






		H.	Outstanding
                                         Balance of Note Net of Balance of Secured Investor Notes: _______ * (F minus G)



 


*
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.


 


The
Conversion Amount converted hereunder shall be deducted from the following Conversion Eligible Tranche(s):


 


	Conversion Amount	 	Tranche No.
	 	 	 
	 	 	 
	 	 	 





 


So that DTC processing can begin, please deliver, via reputable overnight courier,
a certificate representing DTC Eligible Conversion Shares to:


 


	Name:		 
	Address:		 
	 	 	 





  



    Exhibit A to Secured Convertible Promissory Note, Page 1


     

    

 


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


 


	 	BORROWER
	 	 	 
	 	Vape
    Holdings, Inc.
	 	 	 
	 	By:	/s/ Benjamin Beaulieu
	 	Name:	Benjamin Beaulieu
			
	 	Title:	CEO




 


ACKNOWLEDGED, ACCEPTED AND AGREED:


 


LENDER:


 


Typenex
Co-Investment, LLC


 


By:
Red Cliffs Investments, Inc., its Manager


 


	By:	/s/ John M. Fife	 
		John M. Fife, President	 




 


 


[Signature Page
to Convertible Promissory Note]


 



     


     


    

 


EXHIBIT B


 


Vape
Holdings, Inc.


5304
Derry Avenue, Suite C

Agoura Hills, California 91301


 


	Typenex Co-Investment, LLC	 Date: __________




Attn: John Fife


303
East Wacker Drive, Suite 1040


Chicago,
Illinois 60601


 


NOTICE
OF EXERCISE


OF
BORROWER OFFSET RIGHT


 


The
above-captioned Borrower hereby gives notice to Typenex Co-Investment, LLC, a Utah limited liability company (the "Lender"),
pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on November 1, 2016 (the "Note"),
of Borrower's election to exercise the Borrower Offset Right as set forth below. In the event of a conflict between this Notice
of Exercise of Borrower Offset Right and the Note, the Note shall govern. Capitalized terms used in this notice without definition
shall have the meanings given to them in the Note.


 


A.
   Effective Date of Offset:                      
 , 201_


B.    Amount
of Offset:                       



C.
   Secured Investor Note(s) Being Offset:                      



 


*
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 Notice of Exercise
of Borrower Offset Right and such Transaction Documents.


 


Sincerely,


 


Borrower:


 


Vape
Holdings, Inc.


 


	By:	             	 
	Name:		 
	Title:		 




 


 


 


 


Exhibit
B to Secured Convertible Promissory Note, Page 1