Document:

EX-4.15

 Exhibit 4.15 
  

 
  

JUNIOR LIEN INTERCREDITOR AGREEMENT 

dated as of [●], 2016 between 

BANK OF MONTREAL 
 as Priority Lien
Agent, 
 and 
 BANK OF MONTREAL

 as Second Lien Collateral Agent 
 THIS IS THE
INTERCREDITOR AGREEMENT REFERRED TO IN (A) THE INDENTURE DATED AS OF [●], 2016, AMONG COMSTOCK RESOURCES, INC., CERTAIN OF ITS SUBSIDIARIES FROM TIME TO TIME PARTY THERETO AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS SECOND LIEN
TRUSTEE, (B) THE INDENTURE DATED AS OF [●], 2016, AMONG COMSTOCK RESOURCES, INC., CERTAIN OF ITS SUBSIDIARIES FROM TIME TO TIME PARTY THERETO AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS SECOND LIEN TRUSTEE, (C) THE INDENTURE DATED
AS OF [●], 2016 AMONG COMSTOCK RESOURCES, INC., CERTAIN OF ITS SUBSIDIARIES FROM TIME TO TIME PARTY THERETO AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS PRIORITY LIEN TRUSTEE, (D) THE CREDIT AGREEMENT DATED AS OF MARCH 4,
2015, AS AMENDED, SUPPLEMENTED, RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME, AMONG COMSTOCK RESOURCES, INC., AS BORROWER, THE LENDERS PARTY THERETO FROM TIME TO TIME AND BANK OF MONTREAL, AS ADMINISTRATIVE AGENT, (E) THE AMENDED AND RESTATED
PRIORITY LIEN INTERCREDITOR AGREEMENT DATED AS OF [●], 2016, AMONG COMSTOCK RESOURCES, INC., CERTAIN OF ITS SUBSIDIARIES FROM TIME TO TIME PARTY THERETO, BANK OF MONTREAL, AS PARI PASSU COLLATERAL AGENT AND AMERICAN STOCK TRANSFER & TRUST
COMPANY, LLC, AS TRUSTEE, (F) THE OTHER NOTE DOCUMENTS REFERRED TO IN SUCH INDENTURES AND (G) THE OTHER LOAN DOCUMENTS REFERRED TO IN SUCH CREDIT AGREEMENT. 

 Table of Contents 
  

							
	 	    	 	  	Page	 
			
	ARTICLE I.	    	 DEFINITIONS
	  	 	1	  
			
	 Section 1.01
	    	 Construction; Certain Defined Terms
	  	 	1	  
			
	 ARTICLE II.
	    	 LIEN PRIORITIES
	  	 	12	  
			
	 Section 2.01
	    	 Relative Priorities
	  	 	12	  
			
	 Section 2.02
	    	 Prohibition on Marshalling, Etc.
	  	 	13	  
			
	 Section 2.03
	    	 No New Liens
	  	 	13	  
			
	 Section 2.04
	    	 Similar Collateral and Agreements
	  	 	14	  
			
	 Section 2.05
	    	 No Duties of Agents
	  	 	14	  
			
	 ARTICLE III.
	    	 ENFORCEMENT RIGHTS
	  	 	18	  
			
	 Section 3.01
	    	 Limitation on Enforcement Action
	  	 	18	  
			
	 Section 3.02
	    	 Standstill Period; Permitted Enforcement Action
	  	 	19	  
			
	 Section 3.03
	    	 Insurance
	  	 	19	  
			
	 Section 3.04
	    	 Notification of Release of Collateral
	  	 	20	  
			
	 Section 3.05
	    	 No Interference; Payment Over
	  	 	20	  
			
	 ARTICLE IV.
	    	 OTHER AGREEMENTS
	  	 	22	  
			
	 Section 4.01
	    	 Release of Liens; Automatic Release of Second Liens
	  	 	22	  
			
	 Section 4.02
	    	 Certain Agreements With Respect to Insolvency or Liquidation Proceedings
	  	 	22	  
			
	 Section 4.03
	    	 Reinstatement
	  	 	26	  
			
	 Section 4.04
	    	 Refinancings
	  	 	27	  
			
	 Section 4.05
	    	 Amendments to Second Lien Documents
	  	 	28	  
			
	 Section 4.06
	    	 Legends
	  	 	28	  
			
	 Section 4.07
	    	 Second Lien Secured Parties as Unsecured Creditors; Judgment Lien Creditor
	  	 	28	  
			
	 Section 4.08
	    	 Postponement of Subrogation
	  	 	29	  
			
	 Section 4.09
	    	 Acknowledgment by the Secured Debt Representatives
	  	 	29	  
			
	 ARTICLE V.
	    	 GRATUITOUS BAILMENT FOR PERFECTION OF CERTAIN SECURITY INTERESTS
	  	 	29	  
			
	 Section 5.01
	    	 General
	  	 	29	  
			
	 Section 5.02
	    	 Deposit Accounts
	  	 	30	  
			
	 ARTICLE VI.
	    	 APPLICATION OF PROCEEDS; DETERMINATION OF AMOUNTS
	  	 	30	  
			
	 Section 6.01
	    	 Application of Proceeds
	  	 	30	  
			
	 Section 6.02
	    	Determination of Amounts	  	 	31	  

  
 i 

 Table of Contents 

(continued) 
  

							
	 	    	 	  	Page	 
			
	ARTICLE VII.	    	NO RELIANCE; NO LIABILITY; OBLIGATIONS ABSOLUTE; CONSENT OF GRANTORS; ETC.	  	 	31	  
			
	 Section 7.01
	    	No Reliance; Information	  	 	31	  
			
	 Section 7.02
	    	No Warranties or Liability	  	 	32	  
			
	 Section 7.03
	    	Obligations Absolute	  	 	33	  
			
	 Section 7.04
	    	Grantors Consent	  	 	33	  
			
	ARTICLE VIII.	    	REPRESENTATIONS AND WARRANTIES	  	 	33	  
			
	 Section 8.01
	    	Representations and Warranties of Each Party	  	 	33	  
			
	 Section 8.02
	    	Representations and Warranties of Each Representative	  	 	34	  
			
	ARTICLE IX.	    	MISCELLANEOUS	  	 	34	  
			
	 Section 9.01
	    	Notices	  	 	34	  
			
	 Section 9.02
	    	Waivers; Amendment	  	 	35	  
			
	 Section 9.03
	    	Actions Upon Breach; Specific Performance	  	 	35	  
			
	 Section 9.04
	    	Parties in Interest	  	 	36	  
			
	 Section 9.05
	    	Survival of Agreement	  	 	36	  
			
	 Section 9.06
	    	Counterparts	  	 	36	  
			
	 Section 9.07
	    	Severability	  	 	36	  
			
	 Section 9.08
	    	Governing Law; Jurisdiction; Consent to Service of Process	  	 	36	  
			
	 Section 9.09
	    	WAIVER OF JURY TRIAL	  	 	37	  
			
	 Section 9.10
	    	Headings	  	 	37	  
			
	 Section 9.11
	    	Conflicts	  	 	37	  
			
	 Section 9.12
	    	Provisions Solely to Define Relative Rights	  	 	37	  
			
	 Section 9.13
	    	Certain Terms Concerning the Second Lien Collateral Agent	  	 	37	  
			
	 Section 9.14
	    	Certain Terms Concerning the Priority Lien Agent and Second Lien Collateral Agent	  	 	38	  
			
	 Section 9.15
	    	Authorization of Secured Agents	  	 	38	  
			
	 Section 9.16
	    	Further Assurances	  	 	38	  
			
	 Section 9.17
	    	Relationship of Secured Parties	  	 	38	  
			
	 Section 9.18
	    	 Resignation of Agent
	  	 	39	  

  
 ii 

 Table of Contents 

(continued) 
  

							
	 	    	 	  	Page	 
			
	ARTICLE X.	    	 SECOND LIEN RIGHT TO PURCHASE
	  	 	40	  
			
	 Section 10.01
	    	 Purchase Right
	  	 	40	  
			
	 Section 10.02
	    	 Purchase Notice
	  	 	40	  
			
	 Section 10.03
	    	 Purchase Price
	  	 	40	  
			
	 Section 10.04
	    	 Purchase Closing
	  	 	41	  
			
	 Section 10.05
	    	 Actions After Purchase Closing
	  	 	41	  
			
	 Section 10.06
	    	 No Recourse or Warranties; Defaulting Priority Lien Secured Parties
	  	 	41	  

  
 iii 

 Annex and Exhibits 

Annex I 
  

			
	Exhibit A	  	Form of Priority Confirmation Joinder
	 Exhibit B
	  	 Security Documents

  
 iv 

 JUNIOR LIEN INTERCREDITOR AGREEMENT, dated as of [●], 2016 (as amended, supplemented
or otherwise modified from time to time in accordance with the terms hereof, this “Agreement”), between BANK OF MONTREAL, as collateral agent for the Priority Lien Secured Parties referred to herein (in such capacity, and together
with its successors and assigns in such capacity, the “Original Priority Lien Agent”), and BANK OF MONTREAL, as collateral agent for the Second Lien Secured Parties referred to herein (in such capacity, and together with its
successors and assigns in such capacity, the “Original Second Lien Collateral Agent).” 
 Reference is made to (a) the
Priority Credit Agreement (defined below), (b) the Priority Lien Indenture (defined below) governing the Priority Lien Notes (defined below). (c) the 2019 Second Lien Indenture (defined below) governing the 2019 Second Lien Indenture Notes (defined
below) and (d) the 2020 Second Lien Indenture (defined below) governing the 2020 Second Lien Indenture Notes (defined below). 
 In
consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Priority Lien Agent (for itself and on behalf of the Priority Lien Secured Parties)
and the Second Lien Collateral Agent (for itself and on behalf of the Second Lien Secured Parties) agree as follows: 
 ARTICLE I.

 DEFINITIONS 

Section 1.01 Construction; Certain Defined Terms. (a) The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any reference
herein to any agreement, instrument, other document, statute or regulation shall be construed as referring to such agreement, instrument, other document, statute or regulation as from time to time amended, supplemented or otherwise modified, (ii)
any reference herein to any Person shall be construed to include such Person’s successors and assigns, but shall not be deemed to include the subsidiaries of such Person unless express reference is made to such subsidiaries, (iii) the words
“herein,” “hereof and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections and
Annexes shall be construed to refer to Articles, Sections and Annexes of this Agreement, (v) unless otherwise expressly qualified herein, the words “asset” and “property” shall be construed to have the same meaning and effect and
to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights and (vi) the term “or” is not exclusive. 

(b) All terms used in this Agreement that are defined in Article 1, 8 or 9 of the New York UCC
(whether capitalized herein or not) and not otherwise defined herein have the meanings assigned to them in Article 1, 8 or 9 of the New York UCC. If a term is defined in
Article 9 of the New York UCC and another Article of the UCC, such term shall have the meaning assigned to it in Article 9 of the New York UCC. 

 (c) Unless otherwise set forth herein, all references herein to (i) the Priority Lien Agent shall
be deemed to refer to the Priority Lien Agent in its capacity as administrative agent under the Priority Lien Security Documents, and (ii) the Second Lien Collateral Agent shall be deemed to refer to the Second Lien Collateral Agent in its capacity
as collateral agent under the Second Lien Security Documents. 
 (d) As used in this Agreement, the following terms have the meanings
specified below: 
 “2019 Second Lien Indenture” means the Indenture, dated as of [●], 2016, among Comstock, the
other Grantors party thereto from time to time, and the Second Lien Trustee, regarding the 2019 Second Lien Indenture Notes. 

“2019 Second Lien Indenture Notes” means the 7 3⁄4% Convertible Secured PIK Notes due 2019 issued on and after the date hereof under the 2019 Second Lien Indenture (including, for the avoidance of doubt, additional securities issued in connection with the
payment of interest in kind on such notes). 
 “2020 Second Lien Indenture” means the Indenture, dated as of [●],
2016, among Comstock, the other Grantors party thereto from time to time, and the Second Lien Trustee, regarding the 2020 Second Lien Indenture Notes. 

“2020 Second Lien Indenture Notes” means the 9 1⁄2% Convertible Secured PIK Notes issued on and after the date hereof under the 2020 Second Lien Indenture (including, for the avoidance of doubt, additional securities issued in connection with the payment of
interest in kind on such notes). 
 “Accounts” has the meaning assigned to such term in
Section 3.01(a). 
 “Affiliate” of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms
“controlling,” “controlled by” and “under common control with” have correlative meanings. 

“Agent” means the Priority Lien Agent and/or the Second Lien Collateral Agent, as applicable. 

“Authorized Representative” means (a) in the case of the Priority Credit Agreement, the Revolving Credit Agreement Agent (as
defined in the Priority Lien Intercreditor Agreement), (b) in the case of the Priority Lien Indenture, the Priority Lien Trustee, and (c) in the case of any Series of Second Lien Debt, the Authorized Representative named for such Series in the
applicable Second Lien Indenture. 

  
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 “Bankruptcy Code” means Title 11 of the United States Code. 

“Bankruptcy Law” means the Bankruptcy Code and any similar federal, state or foreign law for the relief of debtors. 

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions are authorized or
required by law to close in New York State, Texas State or the place of payment. 
 “Capital Stock” means (a) in the case
of a corporation, corporate stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (c) in the case of a partnership or limited
liability company, partnership interests (whether general or limited) or membership interests; and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets
of, the issuing Person. 
 “Class” means (a) in the case of Priority Lien Debt, the Priority Lien Debt, taken together, (b)
in the case of Second Lien Debt, the Second Lien Debt, taken together. 
 “Collateral” means all of the assets and property
of any Grantor, whether real, personal or mixed, constituting the Priority Lien Collateral and/or the Second Lien Collateral. 

“Commodity Agreements” means, in respect of any Person, any forward contract, commodity swap agreement, commodity option
agreement, cap or collar contract, hedging contracts or other derivative contracts or other similar agreement or arrangement in respect of Hydrocarbons used, produced, processed or sold by such Person and designed to protect such Person against
fluctuation in Hydrocarbon prices. 
 “Comstock” means Comstock Resources, Inc., a Nevada corporation. 

“Credit Facilities” means one or more debt facilities (including, without limitation, the Priority Credit Agreement and any
Refinancing Priority Credit Agreement), with banks or other institutional lenders or investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced in whole or in
part from time to time, including any agreement extending the maturity thereof or otherwise restructuring all or any portion of the indebtedness thereunder or increasing the amount loaned thereunder or altering the maturity thereof; excluding, for
purposes of clarification, the Priority Lien Indenture and any other debt securities. 
 “Currency Agreement” means any
foreign exchange contract, currency swap agreement, currency futures contract, currency option agreement or other similar agreement intended to manage exposure to fluctuations in currency exchange rates. 

“Defaulting Priority Lien Secured Party” has the meaning assigned to such term in Section 10.06(c). 

  
 3 

 “DIP Financing” has the meaning assigned to such term in
Section 4.02(b). 
 “DIP Financing Liens” has the meaning assigned to such term in
Section 4.02(b). 
 “DIP Lenders” has the meaning assigned to such term in
Section 4.02(b). 
 “Discharge of Priority Lien Obligations” means the occurrence of all of the
following: 
 (a) termination or expiration of all commitments to extend credit that would constitute Priority Lien Debt; 

(b) payment in full in cash of the principal of and interest, fees and premium (if any) on all Priority Lien Debt (other than any undrawn
letters of credit and Excess Priority Lien Obligations); 
 (c) discharge or cash collateralization (at 105% of the aggregate undrawn
amount) of all outstanding letters of credit constituting Priority Lien Debt; 
 (d) payment in full in cash of obligations in respect of
Hedging Obligations that are secured by the Priority Liens (and, with respect to any particular Hedge Obligation, termination of such agreement and payment in full in cash of all obligations thereunder or such other arrangements as have been made by
the counterparty thereto (and communicated to the Priority Lien Agent)); and 
 (e) payment in full in cash of all other Priority Lien
Obligations that are outstanding and unpaid at the time the Priority Lien Debt is paid in full in cash (other than any obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no claim or
demand for payment has been made at or prior to such time); 
 provided that, if, at any time after the Discharge of Priority Lien Obligations has
occurred, Comstock or any other Grantor enters into any Priority Lien Document evidencing a Priority Lien Obligation which incurrence is not prohibited by the applicable Secured Debt Documents, then such Discharge of Priority Lien Obligations shall
automatically be deemed not to have occurred for all purposes of this Agreement with respect to such new Priority Lien Obligations (other than with respect to any actions taken as a result of the occurrence of such first Discharge of Priority Lien
Obligations), and, from and after the date on which Comstock designates such Indebtedness as Priority Lien Debt in accordance with this Agreement, the obligations under such Priority Lien Document shall automatically and without any further action
be treated as Priority Lien Obligations for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Collateral set forth in this Agreement, any Second Lien Obligations shall be deemed to have been at
all times Second Lien Obligations and at no time Priority Lien Obligations. For the avoidance of doubt, a Replacement as contemplated by Section 4.04 shall not be deemed to cause a Discharge of Priority Lien
Obligations. 
 “Disposition” shall mean any sale, lease, exchange, assignment, license, contribution, transfer or other
disposition. “Dispose” shall have a correlative meaning. 

  
 4 

 “Excess Priority Lien Obligations” means Obligations constituting Priority Lien
Obligations for the principal amount of loans, letters of credit, reimbursement obligations and Priority Lien Notes under the Priority Lien Documents to the extent that such Obligations are in excess of the Priority Lien Cap. 

“Governmental Authority” means the government of the United States or any other nation, or any political subdivision thereof,
whether state, provincial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other Person exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government. 
 “Grantor” means Comstock, and each subsidiary of Comstock that shall have granted any Lien in
favor of any of the Priority Lien Agent, or the Second Lien Collateral Agent on any of its assets or properties to secure any of the Secured Obligations. 

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under Interest Rate
Agreements, Currency Agreements or Commodity Agreements. 
 “Hydrocarbon Interests” means all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature. 
 “Hydrocarbons” means oil, natural gas,
casing head gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, petroleum and all constituents, elements or compounds thereof and products refined or processed therefrom. 

“Insolvency or Liquidation Proceeding” means: 

(a) any case commenced by or against Comstock or any other Grantor under the Bankruptcy Code or any other Bankruptcy Law, any other proceeding
for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of Comstock or any other Grantor, any receivership or assignment for the benefit of creditors relating to Comstock or any other Grantor or any similar
case or proceeding relative to Comstock or any other Grantor or its creditors, as such, in each case whether or not voluntary; 
 (b) any
liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to Comstock or any other Grantor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency; or 

(c) any other proceeding of any type or nature in which substantially all claims of creditors of Comstock or any other Grantor are determined
and any payment or distribution is or may be made on account of such claims. 
 “Interest Rate Agreement” means with
respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a beneficiary. 

  
 5 

 “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest, or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof,
any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. 

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York. 

“Obligations” means any principal (including reimbursement obligations and obligations to provide cash collateral with
respect to letters of credit whether or not drawn), premium, interest (including, to the extent legally permitted, all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable
post-default rate even if such interest is not enforceable, allowable or allowed as a claim in such proceeding), premium (if any), penalties, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the
documentation governing any Indebtedness. 
 “Officer” means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. 

“Officer’s Certificate” means a certificate signed on behalf of Comstock (as applicable) by an Officer of Comstock. 

“Original Priority Lien Agent” has the meaning assigned to such term in the preamble hereto. 

“Original Second Lien Collateral Agent” has the meaning assigned to such term in the preamble hereto. 

“Original 2019 Second Lien Trustee” means American Stock Transfer & Trust Company, LLC, in its capacity as trustee
under the 2019 Second Lien Indenture, and together with its successors in such capacity. 
 “Original 2020 Second Lien
Trustee” means American Stock Transfer & Trust Company, LLC, in its capacity as trustee under the 2020 Second Lien Indenture, and together with its successors in such capacity. 

“Pari Passu Excluded Collateral” has the meaning set forth in the Priority Lien Intercreditor Agreement. 

  
 6 

 “Person” means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. 

“Priority Confirmation Joinder” means an agreement substantially in the form of Exhibit A. 

“Priority Credit Agreement” means (a) the Credit Agreement dated as of March 4, 2015, among Comstock, as Borrower, the
Lenders party thereto from time to time and Bank of Montreal, as Administrative Agent, as amended, restated, amended and restated, adjusted, waived, renewed, extended, increased, supplemented or otherwise Replaced from time to time with the same
and/or different lenders (who, for the avoidance of doubt, must be (i) lenders party to the Priority Credit Agreement on the date hereof, (ii) commercial bank lenders, (iii) investment banks, or (iv) Affiliates of Persons described in the foregoing
clauses (i), (ii) and (iii), which, in each case, regularly participate in reserve based credit facilities) (such Replaced credit facility, a “Refinancing Priority Credit Agreement”) and/or agents and (b) any credit agreement, loan
agreement or any other agreement or instrument evidencing or governing the terms of any Priority Substitute Credit Facility. 

“Priority Lien” means a Lien granted, or purported to be granted, by Comstock or any other Grantor in favor of the Priority
Lien Agent, at any time, upon any Property of Comstock or any other Grantor to secure Priority Lien Obligations (including Liens on such Collateral under the security documents associated with any Priority Substitute Credit Facility). 

“Priority Lien Agent” means the Original Priority Lien Agent, and its replacements, successors and assigns, in its capacity
as the collateral agent for all holders of “Pari Passu Obligations” (as defined in the Priority Lien Intercreditor Agreement). 

“Priority Lien Cap” means, as of any date, (a) the aggregate principal amount of Priority Lien Debt and all other Obligations
in respect of Priority Lien Debt; provided that (i) the aggregate principal amount of all such Indebtedness outstanding under the Priority Credit Agreement at any time does not exceed $50 million after giving effect to the application of the
proceeds therefrom, and (ii) the aggregate principal amount of Priority Lien Notes under the Priority Lien Indenture at any time does not exceed $791,875,000, plus (b) the amount of all Hedging Obligations, to the extent such Hedging Obligations are
secured by the Priority Liens, plus (c) the amount of accrued and unpaid interest (excluding any interest paid-in-kind) and outstanding fees, to the extent such Obligations are secured by the Priority Liens. For purposes of this definition, all
letters of credit will be valued at the face amount thereof, whether or not drawn. 
 “Priority Lien Collateral” shall mean
all “Collateral” or “Mortgaged Property”, as defined in the Priority Credit Agreement or any other Priority Lien Document, and any other assets of any Grantor now or at any time hereafter subject to Liens which secure, but only
to the extent securing, any Priority Lien Obligation. 
 “Priority Lien Debt” means (i) the indebtedness under the Priority
Credit Agreement (including letters of credit (with outstanding letters of credit being deemed to have a principal 

  
 7 

 
amount equal to the stated amount thereof) and reimbursement obligations with respect thereto) and additional indebtedness under any Priority Substitute Credit Facility, and (ii) indebtedness
outstanding under the Priority Lien Indenture, in each case that was permitted to be incurred and secured under the Priority Credit Agreement, the Second Lien Indentures and any Second Lien Substitute Facility. 

“Priority Lien Documents” means the Priority Credit Agreement, the Priority Lien Indenture, the Priority Lien Security
Documents, the other “Loan Documents” (as defined in the Priority Credit Agreement) and all other loan documents, notes, guarantees, instruments and agreements governing or evidencing, or executed or delivered in connection with, any
Priority Substitute Credit Facility. 
 “Priority Lien Indenture” means the Indenture dated as of [●], 2016 among
Comstock, the other Grantors party thereto, and American Stock Transfer & Trust Company, LLC, as trustee, regarding the Priority Lien Notes, as such Indenture may be amended, restated, modified, renewed, refunded, replaced or refinanced in
compliance with the Priority Lien Intercreditor Agreement. 
 “Priority Lien Intercreditor Agreement” means that certain
Amended and Restated Priority Lien Intercreditor Agreement dated as of [●], 2015, among the Pari Passu Collateral Agent (as defined therein) the Revolving Credit Agreement Agent (as defined therein), the Trustee (as defined therein) and
Comstock, as the same may be amended, restated, modified, renewed, refunded, replaced or refinanced in compliance with the Priority Lien Intercreditor Agreement. 

“Priority Lien Notes” means the Senior Secured Toggle Notes due 2020 issued on the date hereof under the Priority Lien
Indenture and the additional Senior Secured Toggle Notes due 2020 issued hereafter under the Priority Lien Indenture. 
 “Priority
Lien Note Obligations” has the meaning assigned to such term in Section 10.01(a). 
 “Priority Lien
Obligations” means the “Pari Passu Obligations”, as defined in the Priority Lien Intercreditor Agreement, as in effect on the date hereof. 

“Priority Lien Secured Party” means, at any time, each “Pari Passu Secured Party”, as defined in the Priority Lien
Intercreditor Agreement, as in effect on the date hereof. 
 “Priority Lien Security Documents” means the Priority Credit
Agreement (insofar as the same grants a Lien on the Collateral), each agreement listed in Part A of Exhibit B hereto, and any other security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, control agreements, or
grants or transfers for security, now existing or entered into after the date hereof, executed and delivered by Comstock or any other Grantor creating (or purporting to create) a Lien upon Collateral in favor of the Priority Lien Agent, in each
case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms (including any such agreements, assignments, mortgages, deeds of trust and other documents or instruments associated with
any Priority Substitute Credit Facility). 

  
 8 

 “Priority Substitute Credit Facility” means any Credit Facility with respect to
which the requirements contained in Section 4.04 of this Agreement have been satisfied and that Replaces the Priority Credit Agreement then in existence. For the avoidance of doubt, no Priority Substitute Credit
Facility shall be required to be a revolving or asset-based loan facility and may be a facility evidenced or governed by a credit agreement, loan agreement or any other agreement or instrument; provided that any Priority Lien securing such Priority
Substitute Credit Facility shall be subject to the terms of this Agreement for all purposes (including the lien priorities as set forth herein as of the date hereof). 

“Priority Lien Trustee” means the “Trustee” as defined in the Priority Lien Intercreditor Agreement. 

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible,
including, without limitation, cash, securities, accounts and contract rights. 
 “Purchase Date” has the meaning assigned
to such term in Section 10.02(a). 
 “Purchase Event” has the meaning assigned to such term in Section
10.01(a). 
 “Purchase Notice” has the meaning assigned to such term in Section 10.02(a). 

“Purchasing Holders” has the meaning assigned to such term in Section 10.01(a). 

“Replaces” means, (a) in respect of any agreement with reference to the Priority Credit Agreement, the Priority Lien
Indenture, or the Priority Lien Obligations or any Priority Substitute Credit Facility, that such agreement refunds, refinances or replaces the Priority Credit Agreement, the Priority Lien Indenture, the Priority Lien Obligations or such Priority
Substitute Credit Facility in whole (in a transaction that is in compliance with Section 4.04) and that all commitments thereunder are terminated, or, to the extent permitted by the terms of the Priority Credit Agreement,
the Priority Lien Indenture, Priority Lien Obligations or such Priority Substitute Credit Facility, in part, and (b) in respect of any agreement with reference to the Second Lien Documents, the Second Lien Obligations or any Second Lien Substitute
Facility, that such indebtedness refunds, refinances or replaces the Second Lien Documents, the Second Lien Obligations or such Second Lien Substitute Facility in whole (in a transaction that is in compliance with
Section 4.04) and that all commitments thereunder are terminated, or, to the extent permitted by the terms of the Second Lien Documents, the Second Lien Obligations or such Second Lien Substitute Facility, in
part. “Replace,” “Replaced” and “Replacement” shall have correlative meanings. 

“Second Lien” means a Lien granted, or purported to be granted, by Comstock or any other Grantor in favor of the Second Lien
Collateral Agent, at any time, upon any property of Comstock or any other Grantor to secure Second Lien Obligations (including Liens on such Collateral under the security documents associated with any Second Lien Substitute Facility). 

“Second Lien Collateral” shall mean all “Collateral” or “Mortgaged Property”, as defined in any Second
Lien Document, and any other assets of any Grantor now or at any time hereafter subject to Liens which secure, but only to the extent securing, any Second Lien Obligations. 

  
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 “Second Lien Collateral Agent” means the Original Second Lien Collateral Agent
and its replacements, successors and assigns, in its capacity as the collateral agent for all holders of Second Lien Obligations. 

“Second Lien Debt” means the indebtedness under the Second Lien Indenture Notes issued on and after the date hereof and
guarantees thereof that was permitted to be incurred and secured in accordance with the Secured Debt Documents, and all Indebtedness incurred under any Second Lien Substitute Facility. 

“Second Lien Documents” means each Second Lien Indenture, the Second Lien Indenture Notes, the Second Lien Security Documents
and all other loan documents, notes, guarantees, instruments and agreements governing or evidencing the Second Lien Obligations or any Second Lien Substitute Facility. 

“Second Lien Indentures” means (i) the 2019 Second Lien Indenture, and (ii) the 2020 Second Lien Indenture, in each case
as amended, restated, adjusted, waived, renewed, extended, supplemented or otherwise modified from time to time in accordance with the terms hereof unless restricted by the terms of this Agreement, and any credit agreement, loan agreement, note
agreement, promissory note, indenture or any other agreement or instrument evidencing or governing the terms of any Second Lien Substitute Facility. 

“Second Lien Indenture Notes” means (i) the 2019 Second Lien Indenture Notes, and (ii) the 2020 Second Lien Indenture
Notes. 
 “Second Lien Obligations” means Second Lien Debt and all other Obligations in respect
thereof. Notwithstanding any other provision hereof, the term “Second Lien Obligations” will include accrued interest, fees, costs, and other charges incurred under the Second Lien Indenture and the other Second Lien Documents,
whether incurred before or after commencement of an Insolvency or Liquidation Proceeding and whether or not allowable in an Insolvency or Liquidation Proceeding. 

“Second Lien Pledge Agreement” means the Second Lien Pledge Agreement and Irrevocable Proxy dated as of [●], 2016, by
and among Comstock, each of the other Grantors party thereto and the Second Lien Collateral Agent, for the ratable benefit of the Second Lien Secured Parties. 

“Second Lien Secured Parties” means, at any time, the Second Lien Trustee, the Second Lien Collateral Agent, the trustees,
agents and other representatives of the holders of the Second Lien Indenture Notes who maintain the transfer register for such Second Lien Indenture Notes, the beneficiaries of each indemnification obligation undertaken by any Grantor under any
Second Lien Document and each other holder of, or obligee in respect of, any Second Lien Indenture Notes, any holder or lender pursuant to any Second Lien Document outstanding at such time. 

“Second Lien Security Agreement” means the Second Lien Security Agreement dated as of [●], 2016, by and among Comstock,
each of the other Grantors party thereto and the Second Lien Collateral Agent, for the ratable benefit of the Second Lien Secured Parties. 

  
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 “Second Lien Security Documents” means the Second Lien Security Agreement,
Second Lien Pledge Agreement and each other agreement listed in Part B of Exhibit B hereto and any other security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, collateral agency
agreements, control agreements, or grants or transfers for security, now existing or entered into after the date hereof, executed and delivered by Comstock or any other Grantor creating (or purporting to create) a Lien upon Collateral in favor of
the Second Lien Collateral Agent (including any such agreements, assignments, mortgages, deeds of trust and other documents or instruments associated with any Second Lien Substitute Facility), in each case, as amended, modified, renewed, restated or
replaced, in whole or in part, from time to time, in accordance with its terms and Section 4.05. 

“Second Lien Substitute Facility” means any facility with respect to which the requirements contained in
Section 4.04 of this Agreement have been satisfied and that is permitted to be incurred pursuant to the Priority Lien Documents, and, in the case of a Replacement of the Second Lien Indenture Notes in part, the Second Lien
Documents, the proceeds of which are used to, among other things, Replace any Second Lien Indenture. For the avoidance of doubt, no Second Lien Substitute Facility shall be required to be evidenced by notes or other instruments and may be a
facility evidenced or governed by a credit agreement, loan agreement, note agreement, promissory note, indenture or any other agreement or instrument; provided that any such Second Lien Substitute Facility shall be subject to the terms of this
Agreement for all purposes (including the lien priority as set forth herein as of the date hereof) as the other Liens securing the Second Lien Obligations are subject to under this Agreement. 

“Second Lien Trustee” means (i) the Original 2019 Second Lien Trustee, (ii) the Original 2020 Second Lien Trustee, and (iii)
in the case of any Second Lien Substitute Facility, the agent, collateral agent, trustee or other representative of the lenders or other holders of the indebtedness and other obligations evidenced thereunder or governed thereby, together with its
successors in such capacity. 
 “Secured Debt” means the Priority Lien Debt and the Second Lien Debt. 

“Secured Debt Documents” means the Priority Lien Documents and the Second Lien Documents. 

“Secured Debt Representative” means the Priority Lien Agent and the Second Lien Collateral Agent. 

“Secured Obligations” means the Priority Lien Obligations and the Second Lien Obligations. 

“Secured Parties” means the Priority Lien Secured Parties and the Second Lien Secured Parties. 

“Security Documents” means the Priority Lien Security Documents and the Second Lien Security Documents. 

  
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 “Series of Second Lien Debt” means the Second Lien Debt under the 2019 Second
Lien Indenture and the Second Lien Debt under the 2020 Second Lien Indenture. 
 “Series of Secured Debt” means the
Priority Lien Debt and the Second Lien Debt. 
 “Standstill Period” has the meaning assigned to such term in
Section 3.02. 
 “subsidiary” means, with respect to any specified Person: 

(1) any corporation, association or other business entity (other than a partnership) of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors,
managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other subsidiaries of that Person (or a combination thereof); and 

(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a subsidiary of such Person or (b)
the only general partners of which are that Person or one or more subsidiaries of that Person (or any combination thereof). 
 ARTICLE II.

 LIEN PRIORITIES 

Section 2.01 Relative Priorities. (a) The grant of the Priority Liens pursuant to the Priority Lien Documents and the grant of the
Second Liens pursuant to the Second Lien Documents create two separate and distinct Liens on the Collateral. 
 (b) Notwithstanding anything
contained in this Agreement, the Priority Lien Documents, the Second Lien Documents, or any other agreement or instrument or operation of law to the contrary, or any other circumstance whatsoever and irrespective of (i) how a Lien was acquired
(whether by grant, possession, statute, operation of law, subrogation, or otherwise), (ii) the time, manner, order of the grant, attachment or perfection of a Lien, (iii) any conflicting provision of the New York UCC or other applicable law, (iv)
any defect in, or non-perfection, setting aside, or avoidance of, a Lien or a Priority Lien Document or a Second Lien Document, (v) the modification of a Priority Lien Obligation or a Second Lien Obligation or (vi) the subordination of a Lien on
Collateral securing a Priority Lien Obligation to a Lien securing another obligation of Comstock or other Person that is permitted under the Priority Lien Documents as in effect on the date hereof or securing a DIP Financing, or the subordination of
a Lien on Collateral securing a Second Lien Obligation to a Lien securing another obligation of Comstock or other Person (other than a Priority Lien Obligation) that is permitted under the Second Lien Documents as in effect on the date hereof, the
Second Lien Collateral Agent, on behalf of itself and the other Second Lien Secured Parties, hereby agrees that: 
 (i) any Priority Lien
on any Collateral now or hereafter held by or for the benefit of any Priority Lien Secured Party shall be senior in right, priority, operation, effect and all other respects to any and all Second Liens on any Collateral, 

  
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 (ii) any Second Lien on any Collateral now or hereafter held by or for the benefit of any Second
Lien Secured Party shall be junior and subordinate in right, priority, operation, effect and all other respects to any and all Priority Liens on any Collateral, in any case, subject to the Priority Lien Cap as provided herein, and 

(iii) any Second Lien on any Collateral now or hereafter held by or for the benefit of any Second Lien Secured Party shall be equal in right,
priority, operation, effect and all other respects to any and all Second Liens on any Collateral. 
 (c) It is acknowledged that, subject to
the Priority Lien Cap (as provided herein), (i) the aggregate amount of the Priority Lien Obligations may be increased from time to time pursuant to the terms of the Priority Lien Documents, (ii) a portion of the Priority Lien Obligations under the
Priority Lien Credit Agreement consists or may consist of indebtedness that is revolving in nature, and the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and (iii)
(A) the Priority Lien Documents may be replaced, restated, supplemented, restructured or otherwise amended or modified from time to time and (B) the Priority Lien Obligations may be increased, extended, renewed, replaced, restated, supplemented,
restructured, repaid, refunded, refinanced or otherwise amended or modified from time to time, in the case of the foregoing (A) and (B), all without affecting the subordination of the Second Liens hereunder or the provisions of this Agreement
defining the relative rights of the Priority Lien Secured Parties and the Second Lien Secured Parties. The lien priorities provided for herein shall not be altered or otherwise affected by any amendment, modification, supplement, extension,
increase, renewal, restatement or Replacement of any of the Priority Lien Obligations (or any part thereof) or the Second Lien Obligations (or any part thereof), by the release of any Collateral or of any guarantees for any Priority Lien Obligations
or by any action that any Secured Debt Representative or other Secured Party may take or fail to take in respect of any Collateral. 

Section 2.02 Prohibition on Marshalling, Etc. Until the Discharge of Priority Lien Obligations, neither the Second Lien Collateral
Agent nor any other Second Lien Secured Party will assert, and hereby waive, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or claim the benefit of any marshalling, appraisal, valuation or other
similar right that may be available to a junior secured creditor with respect to the Collateral or any similar rights a junior secured creditor may have under applicable law. 

Section 2.03 No New Liens. The parties hereto agree that, (a) so long as the Discharge of Priority Lien Obligations has not
occurred, none of the Grantors shall, nor shall any Grantor permit any of its subsidiaries to, (i) grant or permit any additional Liens on any asset of a Grantor to secure any Second Lien Obligation, or take any action to perfect any additional
Liens, unless it has granted, a Lien on such asset of such Grantor to secure the Priority Lien Obligations and has taken all actions required to perfect such Liens; or (ii) grant or permit any additional Liens on any asset of a Grantor to secure any
Priority Lien Obligation, or take any action to perfect any additional Liens, unless it has granted, a Lien on such asset of such Grantor to secure the Second Lien Obligations and has taken all actions required to perfect such Liens;
provided, however, the refusal or inability of the Second Lien Collateral Agent to accept such Lien will not prevent the Priority Lien Agent from taking the Lien and (b) after the Discharge of Priority Lien Obligations, none of the
Grantors shall, nor shall any Grantor permit 

  
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any of its subsidiaries to grant or permit any additional Liens on any asset of a Grantor to secure any Series of Second Lien Obligation, or take any action to perfect any additional Liens,
unless it has granted, or substantially concurrently therewith grants (or offers to grant), a Lien on such asset of such Grantor to secure the other Series of Second Lien Obligations; provided, however, the refusal or inability of the
Second Lien Collateral Agent for such other Series of Second Lien Debt to accept such Lien will not prevent such Second Lien Collateral Agent from taking the Lien, with each such Lien as described in clauses (a) and (b) of this
Section 2.03 to be subject to the provisions of this Agreement. To the extent that the provisions of the immediately preceding sentence are not complied with for any reason, without limiting any other right or remedy
available to the Priority Lien Agent, the other Priority Lien Secured Parties, the Second Lien Collateral Agent or the other Second Lien Secured Parties, each of the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien
Secured Parties agrees that any amounts received by or distributed to any Second Lien Secured Party pursuant to or as a result of any Lien granted in contravention of this Section 2.03 shall be subject to
Section 3.05(b). 
 Section 2.04 Similar Collateral and Agreements. The parties hereto acknowledge and
agree that it is their intention that the Priority Lien Collateral and the Second Lien Collateral be identical, provided, however, notwithstanding anything herein to the contrary, in no event shall the Priority Lien Agent, any Priority
Lien Secured Party (other than the Revolving Credit Agreement Agent and the Revolving Credit Agreement Secured Parties), the Second Lien Collateral Agent or any Second Lien Secured Party have a Lien on any Pari Passu Excluded Collateral. In
furtherance of the foregoing, the parties hereto agree (a) to cooperate in good faith in order to determine, upon any reasonable request by the Priority Lien Agent or the Second Lien Collateral Agent, the specific assets included in the Priority
Lien Collateral and the Second Lien Collateral, the steps taken to perfect the Priority Liens and the Second Liens thereon and the identity of the respective parties obligated under the Priority Lien Documents and the Second Lien Documents in
respect of the Priority Lien Obligations and the Second Lien Obligations, respectively, (b) that the Second Lien Security Documents providing for the Second Liens shall be in all material respects the same forms of documents providing for the
Priority Liens as the respective Priority Lien Security Documents creating Liens on the Collateral other than as to (i) the priority nature of the Liens created thereunder in such Collateral, (ii) such other modifications to such Second Lien
Security Documents which are less restrictive than the corresponding Priority Lien Security Documents, (iii) provisions in the Second Lien Security Documents which relate solely to the rights and duties of the Second Lien Collateral Agent and the
other Second Lien Secured Parties, and (iv) such deletions or modifications of representations, warranties and covenants as are customary with respect to security documents establishing Liens securing publicly traded debt securities, and (v)
excluding any Lien upon the Pari Passu Excluded Collateral, (c) that at no time shall there be any Grantor that is an obligor in respect of the Second Lien Obligations that is not also an obligor in respect of the Priority Lien Obligations. 

Section 2.05 No Duties of Agents. (a) Each Agent, for itself and on behalf of the applicable Secured Parties, acknowledges
and agrees that no Agent nor any other Secured Party shall have any duties or other obligations to any Second Lien Secured Party with respect to any Collateral, other than to transfer any remaining Collateral and any proceeds of the sale or other
Disposition of any such Collateral remaining in its possession in compliance with this 

  
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Agreement in each case, without representation or warranty on the part of either Agent or any other Secured Party. Each Agent, for itself and on behalf of each applicable Secured Party, hereby
waives any claim any Secured Party may now or hereafter have against either Agent or any of its officers, directors, employees and agents, as the case may be, or any other Secured Party or any of its officers, directors, employees and agents, as the
case may be, arising out of any actions which either Agent or any other Secured Parties take or omit to take (including actions with respect to the creation, perfection or continuation of Liens on any Collateral, actions with respect to the
foreclosure upon, sale, release or depreciation of, or failure to realize upon, any Collateral, and actions with respect to the collection of any claim for all or any part of the Secured Obligations from any account debtor, guarantor or any other
party) in accordance with this Agreement and the Secured Debt Documents or the valuation, use, protection or release of any security for the Secured Obligations. 

(b) In furtherance of the foregoing, each Second Lien Secured Party acknowledges and agrees that until the Discharge of Priority Lien
Obligations (subject to the terms of Section 3.02, including the rights of the Second Lien Secured Parties following the expiration of any applicable Standstill Period), the Priority Lien Agent shall be entitled, for the
benefit of the Priority Lien Secured Parties, to sell, transfer or otherwise Dispose of or deal with the Collateral, as provided herein and in the Priority Lien Documents, without regard to any Second Lien or any rights to which the Second Lien
Collateral Agent or any other Second Lien Secured Party would otherwise be entitled as a result of such Second Lien. Without limiting the foregoing, the Second Lien Collateral Agent, for itself and on behalf of each Second Lien Secured Party,
agrees that neither the Priority Lien Agent nor any other Priority Lien Secured Party shall have any duty or obligation first to marshal or realize upon any type of Collateral, or to sell, Dispose of or otherwise liquidate all or any portion of such
Collateral, in any manner that would maximize the return to the Second Lien Secured Parties, notwithstanding that the order and timing of any such realization, sale, Disposition or liquidation may affect the amount of proceeds actually received by
the Second Lien Secured Parties, from such realization, sale, Disposition or liquidation. 
 (c) Without limiting the generality of the
foregoing, each Agent: 
 (i) shall not be subject to any fiduciary or other implied duties of any kind or nature to any Person, regardless
of whether an event of default under any Secured Debt Document has occurs and is continuing; 
 (ii) shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Security Documents; provided that each Agent shall not be required to take any action that, in its
opinion or the opinion of its counsel, may expose it to liability or that is contrary to any Secured Debt Document or applicable law; 

(iii) shall not, except as expressly set forth herein and in the Secured Debt Documents, have any duty to disclose, and shall not be liable
for the failure to disclose, any information relating to Comstock or any of its Affiliates that is communicated to or obtained by the Person serving as an Agent or any of its Affiliates in any capacity; 

  
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 (iv) shall not be liable for any action taken or not taken by it (A) with the consent or at
the request of the Controlling Party (as defined in the Priority Lien Intercreditor Agreement) or (B) in the absence of its own gross negligence or willful misconduct, which may include reliance in good faith on a certificate of an authorized
officer of Comstock stating that such action is permitted by the terms of this Agreement; and shall be deemed not to have knowledge of any event of default under any Series of Secured Debt unless and until written notice describing such event of
default is given by Comstock to such Agent by the Authorized Representative of such Secured Debt; 
 (v) shall not be responsible for or
have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with this Agreement, any Priority Lien Document or any Second Lien Document, (B) the contents of any certificate, report or
other document delivered hereunder or thereunder or in connection herewith or therewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any
event of default or other default, (D) the validity, enforceability, effectiveness or genuineness of the Agreement, any Priority Lien Document, any Second Lien Document or any other agreement, instrument or document, or the creation, perfection
or priority of any Lien purported to be created by any Priority Lien Document or Second Lien Document, (E) the value or the sufficiency of the Collateral, (F) the satisfaction of any condition set forth in any Priority Lien Document or
Second Lien Document, (G) the state of title to any property purportedly owned by Comstock or any other Person, or (H) the percentage or other measurement of Comstock’s or any other Person’s property which is subject to any Lien
or security interests, other than to confirm receipt of items expressly required to be delivered to such Agent; 
 (vi) shall not have any
fiduciary duties or contractual obligations of any kind or nature under any Priority Lien Document or Second Lien Document (but shall be entitled to all protection provided to such Agent herein); 

(vii) with respect to any Priority Lien Document or Second Lien Document, may conclusively assume that the Grantors have complied with all of
their obligations thereunder unless advised in writing by the Authorized Representative thereunder to the contrary specifically setting forth the alleged violation; 

(viii) may conclusively rely on any certificate of an officer of Comstock provided pursuant to hereunder; 

(ix) whenever reference is made in any Priority Lien Document or Second Lien Document to any action by, consent, designation, specification,
requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by such Agent or to any election, decision, opinion, acceptance, use of
judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Priority Lien Agent, it is understood that in all cases such Agent shall be acting, giving, withholding, suffering,
omitting, making or otherwise undertaking and exercising the same (or shall not be undertaking and exercising the same) solely as directed in writing in accordance with the Priority Lien Intercreditor Agreement and/or this Agreement, as applicable;
this provision is intended solely for the benefit of such 

  
 16 

 
Agent and its successors and permitted assigns and is not intended to and will not entitle the other parties hereto to any defense, claim or counterclaim under or in relation to any Priority Lien
Document or Second Lien Document, or confer any rights or benefits on any party hereto or thereto; 
 (x) notwithstanding any other
provision of this Agreement or any Priority Lien Document or any Second Lien Document to the contrary, shall not be liable for any indirect, incidental, consequential, punitive or special losses or damages, regardless of the form of action and
whether or not any such losses or damages were foreseeable or contemplated; 
 (xi) shall not be required to expand or risk any of its own
funds or otherwise incur any financial or other liability in the performance of any of its duties hereunder, and shall not be obligated to take any legal or other action hereunder, which might in its judgment involve or cause it to incur any expense
or liability, unless it shall have been furnished with acceptable indemnification; and 
 (xii) may (and any of its Affiliates may) accept
deposits from, lend money to ,act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Grantor or any Subsidiary or Affiliate thereof as if such Person were not an Agent and without any
duty to any other Secured Party, including any duty to account therefor. 
 (d) The Grantors agree that they shall defend and be jointly and
severally liable to reimburse and indemnify each Agent for reasonable expenses actually incurred by such Agent in connection with the execution, delivery, administration and enforcement of this Agreement and from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, actual reasonable expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against such Agent, in any way relating to or
arising out of this Agreement or any other document delivered in connection herewith or the transactions contemplated hereby, or the enforcement of any of the terms hereof, in each case, except to the extent caused by its gross negligence or willful
misconduct. The obligations of the Grantors under this Section 2.05(d) shall survive payment of the Secured Obligations and termination of this Agreement and all of the Secured Debt Documents. 

(e) Each Secured Party acknowledges that, in addition to acting as the initial Priority Lien Agent, and the initial Second Lien Collateral
Agent, Bank of Montreal also serves as Revolving Credit Agreement Agent, and that Bank of Montreal or one or more of its Affiliates may have jointly arranged, syndicated, placed or otherwise participated in the facilities and indebtedness
contemplated by the Revolving Credit Agreement and the Second Lien Debt, and each Secured Party hereby waives any right to make any objection or claim against Bank of Montreal, and of its Affiliates or its counsel (or any successor Priority Lien or
Second Lien Collateral Agent or its counsel) based on any alleged conflict of interest or breach of duties arising from the Priority Lien Agent or Second Lien Collateral Agent, and the Bank of Montreal or its Affiliates also serving in such other
capacities. Any knowledge obtained by the Revolving Credit Agreement Agent or any Affiliate of Bank of Montreal regarding the Comstock, any grantor or the nature of the transaction described herein, including a default or potential event of default
shall not be imputed to the Priority Lien Agent. 

  
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 ARTICLE III. 

ENFORCEMENT RIGHTS 

Section 3.01 Limitation on Enforcement Action. Prior to the Discharge of Priority Lien Obligations, the Second Lien
Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, hereby agrees that, subject to Section 3.05(b) and Section 4.07, neither the Second Lien Collateral Agent nor any
other Second Lien Secured Party shall commence any judicial or nonjudicial foreclosure proceedings with respect to, seek to have a trustee, receiver, liquidator or similar official appointed for or over, attempt any action to take possession of,
exercise any right, remedy or power with respect to, or otherwise take any action to enforce its interest in or realize upon, or take any other action available to it in respect of, any Collateral under any Second Lien Security Document, applicable
law or otherwise (including but not limited to any right of setoff), it being agreed that only the Priority Lien Agent, acting in accordance with the applicable Priority Lien Documents, shall have the exclusive right (and whether or not any
Insolvency or Liquidation Proceeding has been commenced), to take any such actions or exercise any such remedies, in each case, without any consultation with or the consent of the Second Lien Collateral Agent or any other Second Lien Secured
Party. In exercising rights and remedies with respect to the Collateral, the Priority Lien Agent and the other Priority Lien Secured Parties may enforce the provisions of the Priority Lien Documents and exercise remedies thereunder, all in such
order and in such manner as they may determine in their sole discretion and regardless of whether such exercise and enforcement is adverse to the interest of any Second Lien Secured Party. Such exercise and enforcement shall include the rights
of an agent appointed by them to Dispose of Collateral upon foreclosure, to incur expenses in connection with any such Disposition and to exercise all the rights and remedies of a secured creditor under the Uniform Commercial Code, the Bankruptcy
Code, any other Bankruptcy Law and any other applicable law. Without limiting the generality of the foregoing, the Priority Lien Agent will have the exclusive right to deal with that portion of the Collateral consisting of deposit accounts and
securities accounts (collectively “Accounts”) and any funds or financial assets therein, including exercising rights under control agreements with respect to such Accounts. The Second Lien Collateral Agent, for itself and on
behalf of the other Second Lien Secured Parties, hereby acknowledges and agrees that no covenant, agreement or restriction contained in any Second Lien Security Document or any other Second Lien Document, shall be deemed to restrict in any way the
rights and remedies of the Priority Lien Agent or the other Priority Lien Secured Parties with respect to the Collateral as set forth in this Agreement. Notwithstanding the foregoing, subject to Section 3.05, the
Second Lien Collateral Agent, on behalf of the Second Lien Secured Parties, may, but will have no obligation to, take all such actions (not adverse to the Priority Liens or the rights of the Priority Lien Agent and the other Priority Lien Secured
Parties) it deems necessary to perfect or continue the perfection of the Second Liens in the Collateral or to create, preserve or protect (but not enforce) the Second Liens in the Collateral. Nothing herein shall limit the right or ability of
the Second Lien Secured Parties to (i) purchase (by credit bid or otherwise) all or any portion of the Collateral in connection with any enforcement of remedies by the Priority Lien Agent to the extent that, and so long as, the Priority Lien Secured
Parties receive payment in full in cash of all Priority Lien Obligations (subject to the Priority Lien Cap) after giving effect thereto, or (ii) file a proof of claim with respect to the Second Lien Obligations. 

  
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 Section 3.02 Standstill Period; Permitted Enforcement Action. Prior to the Discharge
of Priority Lien Obligations and notwithstanding the foregoing Section 3.01, both before and during an Insolvency or Liquidation Proceeding after a period of 180 days has elapsed (which period will be tolled during any
period in which the Priority Lien Agent is not entitled, on behalf of the Priority Lien Secured Parties, to enforce or exercise any rights or remedies with respect to any Collateral as a result of (A) any injunction issued by a court of
competent jurisdiction or (B) the automatic stay or any other stay or other prohibition in any Insolvency or Liquidation Proceeding) since the date on which the Second Lien Collateral Agent has delivered to the Priority Lien Agent written
notice of the acceleration of either Series of the Second Lien Debt (the “Accelerated Series of Second Lien Debt”) (the “Standstill Period”), the Second Lien Collateral Agent and the other Second Lien Secured
Parties in respect of the Accelerated Series of Second Lien Debt may enforce or exercise any rights or remedies with respect to any Collateral; provided, however that notwithstanding the expiration of the Standstill Period, in no event
may the Second Lien Collateral Agent or any other Second Lien Secured Party enforce or exercise any rights or remedies with respect to any Collateral, or commence, join with any Person at any time in commencing, or petition for or vote in favor of
any resolution for, any such action or proceeding, if the Priority Lien Agent on behalf of any or all of the Priority Lien Secured Parties shall have commenced, and shall be diligently pursuing (or shall have sought or requested relief from, or
modification of, the automatic stay or any other stay or other prohibition in any Insolvency or Liquidation Proceeding to enable the commencement and pursuit thereof), the enforcement or exercise of any rights or remedies with respect to any
material portion of the Collateral or any such action or proceeding (prompt written notice thereof to be given to the Second Lien Trustee by the Priority Lien Agent); provided, further, that, at any time after the expiration of the
Standstill Period, if neither the Priority Lien Agent nor any other Priority Lien Secured Party shall have commenced and be diligently pursuing (or shall have sought or requested relief from, or modification of, the automatic stay or any other stay
or other prohibition in any Insolvency or Liquidation Proceeding to enable the commencement and pursuit thereof) the enforcement or exercise of any rights or remedies with respect to all or any material portion of the Collateral or any such
action or proceeding, and the Second Lien Collateral Agent shall have commenced the enforcement or exercise of any rights or remedies with respect to all or any material portion of the Collateral or any such action or proceeding, then for so
long as the Second Lien Collateral Agent is diligently pursuing such rights or remedies, none of any Priority Lien Secured Party or the Priority Lien Agent, shall take any action of a similar nature with respect to such Collateral, or commence, join
with any Person at any time in commencing, or petition for or vote in favor of any resolution for, any such action or proceeding. 
 Section
3.03 Insurance. Unless and until the Discharge of Priority Lien Obligations has occurred (subject to the terms of Section 3.02, including the rights of the Second Lien Secured Parties following expiration of any
applicable Standstill Period), the Priority Lien Agent shall have the sole and exclusive right, subject to the rights of the Grantors under the Priority Lien Documents, to adjust and settle claims in respect of Collateral under any insurance policy
in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding (or any deed in lieu of condemnation) affecting the Collateral. Unless and until the Discharge of Priority Lien Obligations has
occurred, and subject to the rights of the Grantors under the Priority Lien Documents, all proceeds of any such policy and any such award (or any payments with respect to a deed in lieu of condemnation) in respect of the Collateral shall be

  
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paid to the Priority Lien Agent pursuant to the terms of the Priority Lien Documents (including for purposes of cash collateralization of commitments, letters of credit and Hedging
Obligations). If the Second Lien Collateral Agent or any other Second Lien Secured Party shall, at any time, receive any proceeds of any such insurance policy or any such award or payment in contravention of the foregoing, it shall pay such
proceeds over to the Priority Lien Agent in accordance with the provisions hereof. In addition, if by virtue of being named as an additional insured or loss payee of any insurance policy of any Grantor covering any of the Collateral, the Second
Lien Collateral Agent or any other Second Lien Secured Party shall have the right to adjust or settle any claim under any such insurance policy, then unless and until the Discharge of Priority Lien Obligations has occurred, the Second Lien
Collateral Agent and any such other Second Lien Secured Party, shall follow the instructions of the Priority Lien Agent, or of the Grantors under the Priority Lien Documents to the extent the Priority Lien Documents grant such Grantors the right to
adjust or settle such claims, with respect to such adjustment or settlement (subject to the terms of Section 3.02, including the rights of the Second Lien Secured Parties following expiration of any applicable Standstill
Period). 
 Section 3.04 Notification of Release of Collateral. Each of the Priority Lien Agent and the Second Lien Collateral
Agent shall give the other Secured Debt Representatives prompt written notice of the Disposition by it of, and release by it of the Lien on, any Collateral. Such notice shall describe in reasonable detail the subject Collateral, the parties involved
in such Disposition or Release, the place, time manner and method thereof, and the consideration, if any, received therefor; provided, however, that the failure to give any such notice shall not in and of itself in any way impair the
effectiveness of any such Disposition or Release. 
 Section 3.05 No Interference; Payment Over. 

(a) No Interference. The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, agrees
that each Second Lien Secured Party (i) will not take or cause to be taken any action the purpose or effect of which is, or could be, to make any Second Lien pari passu with, or to give such Second Lien Secured Party any preference or priority
relative to, any Priority Lien with respect to any Collateral or any part thereof, (ii) will not challenge or question in any proceeding the validity or enforceability of any Priority Lien Obligations or Priority Lien Document, or the validity,
attachment, perfection or priority of any Priority Lien, or the validity or enforceability of the priorities, rights or duties established by the provisions of this Agreement, (iii) will not take or cause to be taken any action the purpose or
effect of which is, or could be, to interfere, hinder or delay, in any manner, whether by judicial proceedings or otherwise, any sale, transfer or other Disposition of the Collateral by the Priority Lien Agent or any other Priority Lien Secured
Party, (iv) shall have no right to (A) direct the Priority Lien Agent or any other Priority Lien Secured Party to exercise any right, remedy or power with respect to any Collateral or (B) consent to the exercise by the Priority Lien
Agent or any other Priority Lien Secured Party of any right, remedy or power with respect to any Collateral, (v) will not institute any suit or assert in any suit or Insolvency or Liquidation Proceeding any claim against the Priority Lien Agent
or other Priority Lien Secured Party seeking damages from or other relief by way of specific performance, instructions or otherwise with respect to, and neither the Priority Lien Agent nor any other Priority Lien Secured Party shall be liable for,
any action taken or omitted to be taken by the Priority Lien Agent or other Priority Lien Secured Party with respect to any Priority Lien Collateral, (vi) prior to the 

  
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Discharge of Priority Lien Obligations, will not seek, and hereby waives any right, to have any Collateral or any part thereof marshaled upon any foreclosure or other Disposition of such
Collateral, (vii) prior to the Discharge of Priority Lien Obligations, will not attempt, directly or indirectly, whether by judicial proceedings or otherwise, to challenge the enforceability of any provision of this Agreement, (viii) will
not object to forbearance by the Priority Lien Agent or any other Priority Lien Secured Party, and (ix) prior to the Discharge of Priority Lien Obligations, will not assert, and hereby waives, to the fullest extent permitted by law, any right
to demand, request, plead or otherwise assert or claim the benefit of any marshalling, appraisal, valuation or other similar right that may be available under applicable law to a junior secured creditor with respect to the Collateral or any similar
rights a junior secured creditor may have under applicable law; and 
 (b) Payment Over. (i) The Second Lien Collateral Agent,
for itself and on behalf of each other Second Lien Secured Party, hereby agrees that if any Second Lien Secured Party shall obtain possession of any Collateral or shall realize any proceeds or payment in respect of any Collateral, pursuant to the
exercise of any rights or remedies with respect to the Collateral under any Second Lien Security Document, or by the exercise of any rights available to it under applicable law or in any Insolvency or Liquidation Proceeding, to the extent permitted
hereunder, at any time prior to the Discharge of Priority Lien Obligations secured, or intended to be secured, by such Collateral, then it shall hold such Collateral, proceeds or payment in trust for the Priority Lien Agent and the other Priority
Lien Secured Parties and transfer such Collateral, proceeds or payment, as the case may be, to the Priority Lien Agent as promptly as practicable. Furthermore, the Second Lien Collateral Agent shall, at the Grantors’ expense, promptly send
written notice to the Priority Lien Agent upon receipt of such Collateral by any Second Lien Secured Party, proceeds or payment and if directed by the Priority Lien Agent within five (5) days after receipt by the Priority Lien Agent of such
written notice, shall deliver such Collateral, proceeds or payment to the Priority Lien Agent in the same form as received, with any necessary endorsements, or as court of competent jurisdiction may otherwise direct. The Priority Lien Agent is
hereby authorized to make any such endorsements as agent for the Second Lien Collateral Agent or any other Second Lien Secured Party. The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party agrees that
if, at any time, it obtains written notice that all or part of any payment with respect to any Priority Lien Obligations previously made shall be rescinded for any reason whatsoever, it will promptly pay over to the Priority Lien Agent any payment
received by it and then in its possession or under its direct control in respect of any such Priority Lien Collateral and shall promptly turn any such Collateral then held by it over to the Priority Lien Agent, and the provisions set forth in this
Agreement will be reinstated as if such payment had not been made, until the Discharge of Priority Lien Obligations. All Second Liens will remain attached to and enforceable against all proceeds so held or remitted, subject to the priorities set
forth in this Agreement. Anything contained herein to the contrary notwithstanding, this Section 3.05(b) shall not apply to any proceeds of Collateral realized in a transaction not prohibited by the Priority Lien Documents
and as to which the possession or receipt thereof by the Second Lien Collateral Agent or any other Second Lien Secured Party is otherwise not prohibited by the Priority Lien Documents. 

  
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 ARTICLE IV. 

OTHER AGREEMENTS 
 Section
4.01 Release of Liens; Automatic Release of Second Liens. (a) Prior to the Discharge of Priority Lien Obligations, the Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, agrees that, in the
event the Priority Lien Agent or the requisite Priority Lien Secured Parties under the Priority Lien Documents release the Priority Lien on any Collateral, each Second Lien on such Collateral shall terminate and be released automatically and without
further action if (i) such release is permitted under the Second Lien Documents (it being agreed that the Priority Lien Agent may conclusively rely upon a written request of Comstock stating that the release of such Lien is permitted under the
Second Lien Documents), (ii) such release is effected in connection with the Priority Lien Agent’s foreclosure upon, or other exercise of rights or remedies with respect to, such Collateral, or (iii) such release is effected in
connection with a sale or other Disposition of any Collateral (or any portion thereof) under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code if the Priority Lien Agent or the requisite Priority Lien Secured
Parties under the Priority Lien Documents shall have consented to such sale or Disposition of such Collateral; provided that, in the case of each of clauses (i), (ii) and (iii), (A) the net proceeds of such Collateral
are applied pursuant to Section 6.01 and (B) the Second Liens on such Collateral shall attach to (and shall remain subject and subordinate to all Priority Liens securing Priority Lien Obligations, subject to the
Priority Lien Cap) any proceeds of a sale, transfer or other Disposition of Collateral not paid to the Priority Lien Secured Parties or that remain after the Discharge of Priority Lien Obligations. 

(b) The Second Lien Collateral Agent agrees to execute and deliver (at the sole cost and expense of the Grantors) all such releases and other
instruments as shall reasonably be requested by the Priority Lien Agent, to evidence and confirm any release of Collateral provided for in this Section 4.01. 

Section 4.02 Certain Agreements With Respect to Insolvency or Liquidation Proceedings. (a) The parties hereto acknowledge that
this Agreement is a “subordination agreement” under Section 510(a) of the Bankruptcy Code and shall continue in full force and effect, notwithstanding the commencement of any Insolvency or Liquidation Proceeding by or against Comstock
or any subsidiary of Comstock. All references in this Agreement to Comstock or any subsidiary of Comstock or any other Grantor will include such Person or Persons as a debtor-in-possession and any receiver or trustee for such Person or Persons in an
Insolvency or Liquidation Proceeding.
 (b) If Comstock or any of its subsidiaries shall become subject to any Insolvency or Liquidation
Proceeding and shall, as debtor(s)-in-possession, or if any receiver or trustee for such Person or Persons shall, move for approval of financing (“DIP Financing”) to be provided by one or more lenders (the “DIP
Lenders”) under Section 364 of the Bankruptcy Code or the use of cash collateral under Section 363 of the Bankruptcy Code, the Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, agrees
that neither it nor any other Second Lien Secured Party will raise any objection, contest or oppose (or join or support any third party in objecting, contesting or opposing), and each Second Lien 

  
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Secured Party shall be deemed to have consented to and will waive any claim such Person may now or hereafter have, to any such financing or to the Liens on the Collateral securing the same
(“DIP Financing Liens”), or to any use, sale or lease of cash collateral that constitutes Collateral or to any grant of administrative expense priority or any super-administrative priority under Section 364 of the Bankruptcy
Code, unless (A) the Priority Lien Agent opposes or objects to such DIP Financing or such DIP Financing Liens or such use of cash collateral, or (B) the terms of such DIP Financing provide for the sale of a substantial part of the
Collateral (other than a sale or disposition pursuant to Section 363 of the Bankruptcy Code and with respect to which the Second Lien Secured Parties are deemed to have consented pursuant to Section 4.02(d)) or require
the confirmation of a plan of reorganization containing specific terms or provisions (other than repayment in cash of such DIP Financing on the effective date thereof). To the extent such DIP Financing Liens are senior to, or rank pari passu with,
the Priority Liens, the Second Lien Collateral Agent will, for itself and on behalf of the other Second Lien Secured Parties, subordinate the Second Liens on the Collateral to the Priority Liens and to such DIP Financing Liens, so long as the Second
Lien Collateral Agent, on behalf of the Second Lien Secured Parties, retains Liens on all the Collateral, including proceeds thereof arising after the commencement of any Insolvency or Liquidation Proceeding, with the same priority relative to the
Priority Liens as existed prior to the commencement of the case under the Bankruptcy Code. 
 (c) Prior to the Discharge of Priority Lien
Obligations, without the written consent of the Priority Lien Agent, in its sole discretion, the Second Lien Collateral Agent, for itself and on behalf of each Second Lien Secured Party, agrees not to propose, support or enter into any DIP
Financing. 
 (d) The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, agrees that it shall
be deemed to have consented to, and shall not object to, oppose or contest (or join with or support any third party objecting to, opposing or contesting), a sale or other Disposition, a motion to sell or Dispose or the bidding procedures for such
sale or Disposition of any Collateral (or any portion thereof) under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code if (1) the Priority Lien Agent or the requisite Priority Lien Secured Parties under the
Priority Lien Documents shall have consented to such sale or Disposition, such motion to sell or Dispose or such bidding procedures for such sale or Disposition of such Collateral, (2) all Priority Liens, Second Liens will attach to the
proceeds of the sale or Disposition in the same respective priorities as set forth in this Agreement, (3) Section 6.01 is complied with in connection with such Disposition or credit bid and (4) the Second Lien
Collateral Agent and the holders of Second Lien Obligations, shall have the right to credit bid all or any portion of the Collateral so long as the Priority Lien Agent and the holders of the Priority Lien Obligations receive payment in full in cash
of all Priority Lien Obligations after giving effect thereto. 
 (e) The Second Lien Collateral Agent, for itself and on behalf of each
other Second Lien Secured Party, waives any claim that it may now or hereafter have against the Priority Lien Agent or any other Priority Lien Secured Party arising out of any DIP Financing Liens (that is granted in a manner that is consistent with
this Agreement) or administrative expense priority or super-administrative priority under Section 364 of the Bankruptcy Code. 

  
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 (f) The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured
Party, agrees that neither the Second Lien Collateral Agent, nor any other Second Lien Secured Party, will file or prosecute in any Insolvency or Liquidation Proceeding any motion for adequate protection (or any comparable request for relief) based
upon their interest in the Collateral, nor object to, oppose or contest (or join with or support any third party objecting to, opposing or contesting) (i) any request by the Priority Lien Agent or any other Priority Lien Secured Party for
adequate protection or (ii) any objection by the Priority Lien Agent or any other Priority Lien Secured Party to any motion, relief, action or proceeding based on the Priority Lien Agent or Priority Lien Secured Parties claiming a lack of
adequate protection, except that the Second Lien Secured Parties may: 
 (i) freely seek and obtain relief granting adequate protection
only in the form of a replacement lien co-extensive in all respects with, but subordinated (as set forth in Section 2.01) to, and with the same relative priority to the Priority Liens as existed prior to the commencement of
the Insolvency or Liquidation Proceeding, all Liens granted in the Insolvency or Liquidation Proceeding to, or for the benefit of, the Priority Lien Secured Parties; and 

(ii) freely seek and obtain any relief upon a motion for adequate protection (or any comparable relief), without any condition or restriction
whatsoever, at any time after the Discharge of Priority Lien Obligations. 
 (g) The Second Lien Collateral Agent, for itself and on behalf
of each of the other of the Second Lien Secured Parties, waives any claim it or any such other Second Lien Secured Party, may now or hereafter have against the Priority Lien Agent or any other Priority Lien Secured Party (or their representatives)
arising out of any election by the Priority Lien Agent or any Priority Lien Secured Parties, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b) of the Bankruptcy Code. 

(h) The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, agrees that in any Insolvency or
Liquidation Proceeding, neither it nor any other Second Lien Secured Party shall support or vote to accept any plan of reorganization or disclosure statement of Comstock or any other Grantor unless such plan is either accepted by the Class of
Priority Lien Secured Parties in accordance with Section 1126(c) of the Bankruptcy Code or provides for the payment in full in cash of all Priority Lien Obligations (including all post-petition interest approved by the bankruptcy court, fees
and expenses, and cash collateral of all letters of credit) not constituting Excess Priority Lien Obligations on the effective date of such plan of reorganization. Except as otherwise provided in this clause (h), each of the Second Lien
Secured Parties shall remain entitled to vote their claims in any such Insolvency or Liquidation Proceeding. 
 (i) The Second Lien
Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, agrees that neither it nor any other Second Lien Secured Party, shall seek relief, pursuant to Section 362(d) of the Bankruptcy Code or otherwise, from the
automatic stay of Section 362(a) of the Bankruptcy Code or from any other stay in any Insolvency or Liquidation Proceeding in respect of the Collateral if the Priority Lien Agent has not received relief from the automatic stay (or it has not
been lifted for the Priority Lien Agent’s benefit) without the prior written consent of the Priority Lien Agent. 

  
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 (j) The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured
Party, agrees that neither it nor any other Second Lien Secured Party, shall oppose or seek to challenge (or join or support any third party in opposing or seeking to challenge) any claim by the Priority Lien Agent or any other Priority Lien Secured
Party for allowance (but not payment until the Discharge of the Priority Lien Obligations has occurred) in any Insolvency or Liquidation Proceeding of Priority Lien Obligations consisting of post-petition interest, fees or expenses or cash
collateralization of all letters of credit to the extent of the value of the Priority Liens (it being understood that such value will be determined without regard to the existence of the Second Liens on the Collateral) subject to the Priority Lien
Cap. Neither Priority Lien Agent nor any other Priority Lien Secured Party shall oppose or seek to challenge any claim by the Second Lien Collateral Agent, or any other Second Lien Secured Party, for allowance (but not payment until the Discharge of
the Priority Lien Obligations has occurred) in any Insolvency or Liquidation Proceeding of Second Lien Obligations consisting of post-petition interest, fees or expenses to the extent of the value of the Second Liens, on the Collateral; provided
that if the Priority Lien Agent or any other Priority Lien Secured Party shall have made any such claim, such claim (i) shall have been approved or (ii) will be approved contemporaneously with the approval of any such claim by the Second
Lien Collateral Agent or any other Second Lien Secured Party. 
 (k) Without the express written consent of the Priority Lien Agent, neither
the Second Lien Collateral Agent, nor any other Second Lien Secured Party shall (or shall join with or support any third party in opposing, objecting to or contesting, as the case may be), in any Insolvency or Liquidation Proceeding involving any
Grantor, (i) oppose, object to or contest the determination of the extent of any Liens held by any of Priority Lien Secured Party or the value of any claims of any such holder under Section 506(a) of the Bankruptcy Code or
(ii) oppose, object to or contest the payment to the Priority Lien Secured Party of interest, fees or expenses, or to the cash collateralization of letters of credit, under Section 506(b) of the Bankruptcy Code subject to the Priority Lien
Cap. 
 (l) Notwithstanding anything to the contrary contained herein, if in any Insolvency or Liquidation Proceeding a determination is
made that any Lien encumbering any Collateral is not enforceable for any reason, then the Second Lien Collateral Agent for itself and on behalf of each other Second Lien Secured Party, agrees that, any distribution or recovery they may receive in
respect of any such Collateral shall be segregated and held in trust and forthwith paid over to the Priority Lien Agent for the benefit of the Priority Lien Secured Parties in the same form as received without recourse, representation or warranty
(other than a representation of the Second Lien Collateral Agent, that it has not otherwise sold, assigned, transferred or pledged any right, title or interest in and to such distribution or recovery) but with any necessary endorsements or as a
court of competent jurisdiction may otherwise direct. The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party hereby appoints the Priority Lien Agent, and any officer or agent of the Priority Lien
Agent, with full power of substitution, the attorney-in-fact of each Second Lien Secured Party for the limited purpose of carrying out the provisions of this Section 4.02(l) and taking any action and executing any
instrument that the Priority Lien Agent may deem necessary or advisable to accomplish the purposes of this Section 4.02(l), which appointment is irrevocable and coupled with an interest. 

  
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 (m) The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured
Party, hereby agrees that the Priority Lien Agent shall have the exclusive right to credit bid the Priority Lien Obligations subject to the Priority Lien Cap and further that neither of the Second Lien Collateral Agent nor any other Second Lien
Secured Party shall (or shall join with or support any third party in opposing, objecting to or contesting, as the case may be) oppose, object to or contest such credit bid by the Priority Lien Agent; provided that (A)
Section 6.01 is complied with in connection with such credit bid and (B) each of the Second Lien Collateral Agent and the holders of Second Lien Obligations shall have the right to credit bid all or any portion of the
Collateral so long as the Priority Lien Agent and the holders of the Priority Lien Obligations receive payment in full in cash of all Priority Lien Obligations after giving effect thereto. 

(n) Until the expiry of the Standstill Period, in the case of the Second Lien Collateral Agent and the holders of Second Lien Obligations,
without the written consent of the Priority Lien Agent in its sole discretion, the Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, agrees that it will not file an involuntary bankruptcy claim or seek
the appointment of an examiner or a trustee for Comstock or any of its subsidiaries.
 (o) Second Lien Collateral Agent, for itself and on
behalf of each other Second Lien Secured Party, waives any right to assert or enforce any claim under Section 506(c) or 552 of the Bankruptcy Code as against any Priority Lien Secured Party or any of the Collateral, except as expressly
permitted by this Agreement. 
 Section 4.03 Reinstatement. If any Priority Lien Secured Party is required in any Insolvency or
Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of any Grantor any amount (a “Recovery”) for any reason whatsoever, then the Priority Lien Obligations shall be reinstated to the extent of such
Recovery and the Priority Lien Secured Parties shall be entitled to a reinstatement of Priority Lien Obligations with respect to all such recovered amounts. The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien
Secured Party, agrees that if, at any time, a Second Lien Secured Party, receives notice of any Recovery, and any Priority Lien Obligations (including any reinstated Priority Lien Obligations) not constituting Excess Priority Lien Obligations are
outstanding, then the Second Lien Collateral Agent and any other Second Lien Secured Party, shall promptly pay over to the Priority Lien Agent any payment received by it and then in its possession or under its control in respect of any Collateral
subject to any Priority Lien securing such Priority Lien Obligations and shall promptly turn any Collateral subject to any such Priority Lien then held by it over to the Priority Lien Agent, and the provisions set forth in this Agreement shall be
reinstated as if such payment had not been made. If this Agreement shall have been terminated prior to any such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release,
discharge, impair or otherwise affect the obligations of the parties hereto from such date of reinstatement. Any amounts received by the Second Lien Collateral Agent or any other Second Lien Secured Party, and then in its possession or under
its control on account of the Second Lien Obligations or after the termination of this Agreement shall, in the event of a reinstatement of this Agreement pursuant to this Section 4.03, be held in trust for and paid over to
the Priority Lien Agent for the benefit of the Priority Lien Secured Parties for application to the reinstated Priority Lien Obligations 

  
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(other than reinstated Priority Lien Obligations constituting Excess Priority Lien Obligations) until the discharge thereof. If any Second Lien Secured Party is required in any Insolvency or
Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of any Grantor any amount (a “Second Lien Recovery”) for any reason whatsoever, then the Second Lien Obligations shall be reinstated to the extent of
such Recovery and the Second Lien Secured Parties shall be entitled to a reinstatement of Second Lien Obligations with respect to all such recovered amounts. After the Discharge of Priority Lien Obligations, the Second Lien Collateral Agent,
for itself and on behalf of each other Second Lien Secured Party, agrees that if, at any time, a Second Lien Secured Party receives notice of any Second Recovery, and any Second Lien Obligations (including any reinstated Second Lien Obligations) are
outstanding, then the Second Lien Collateral Agent or any other Second Lien Secured Party, as applicable, shall promptly pay over to the Second Lien Collateral Agent any payment received by it and then in its possession or under its control in
respect of any Collateral subject to any Second Lien securing such Second Lien Obligations and shall promptly turn any Collateral subject to any such Second Lien then held by it over to the Second Lien Collateral Agent, and the provisions set forth
in this Agreement shall be reinstated as if such payment had not been made. If this Agreement shall have been terminated prior to any such Second Lien Recovery, this Agreement shall be reinstated in full force and effect, and such prior
termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto from such date of reinstatement. Any amounts received by the Second Lien Collateral Agent or any other Second Lien Secured
Party and then in its possession or under its control on account of the Second Lien Obligations after the termination of this Agreement shall, in the event of a reinstatement of this Agreement pursuant to this Section 4.03, be held in
trust for and paid over to the Second Lien Collateral Agent for the benefit of the Second Lien Secured Parties for application to the reinstated Second Lien Obligations until the discharge thereof. This Section 4.03
shall survive termination of this Agreement. 
 Section 4.04 Refinancings. The Priority Lien Obligations and the Second Lien
Obligations may be Replaced, by any Priority Substitute Credit Facility or Second Lien Substitute Facility, as the case may be, in each case, without notice to, or the consent of any Secured Party, all without affecting the Lien priorities provided
for herein or the other provisions hereof; provided, that (i) the Priority Lien Agent, and the Second Lien Collateral Agent shall receive on or prior to incurrence of a Priority Substitute Credit Facility or Second Lien Substitute Facility
(A) an Officer’s Certificate from Comstock stating that (I) the incurrence thereof is permitted by each applicable Secured Debt Document to be incurred and (II) the requirements of Section 4.06 have been satisfied, and
(B) a Priority Confirmation Joinder from the holders or lenders of any indebtedness that Replaces the Priority Lien Obligations or the Second Lien Obligations (or an authorized agent, trustee or other representative on their behalf), (ii) the
aggregate outstanding principal amount of the Priority Lien Obligations under the Priority Credit Agreement, after giving effect to such Priority Substitute Credit Facility, shall not exceed the Priority Lien Cap and (iii) on or before the date of
such incurrence, such Priority Substitute Credit Facility or Second Lien Substitute Facility is designated by Comstock, in an Officer’s Certificate delivered to the Priority Lien Agent and the Second Lien Collateral Agent, as “Priority
Lien Debt” or “Second Lien Debt”, as applicable, for the purposes of the Secured Debt Documents and this Agreement; provided that no Series of Secured Debt may be designated as more than one of Priority Lien Debt or Second Lien
Debt. 

  
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 Each of the then-exiting Priority Lien Agent and the Second Lien Collateral Agent shall be
authorized to execute and deliver such documents and agreements (including amendments or supplements to this Agreement) as such holders, lenders, agent, trustee or other representative may reasonably request to give effect to any such Replacement,
it being understood that the Priority Lien Agent and the Second Lien Collateral Agent or (if permitted by the terms of the applicable Secured Debt Documents) the Grantors, without the consent of any other Secured Party or (in the case of the
Grantors) one or more Secured Debt Representatives, may amend, supplement, modify or restate this Agreement to the extent necessary or appropriate to facilitate such amendments or supplements to effect such Replacement or incurrence all at the
expense of the Grantors. Upon the consummation of such Replacement or incurrence and the execution and delivery of the documents and agreements contemplated in the preceding sentence, the holders or lenders of such indebtedness and any
authorized agent, trustee or other representative thereof shall be entitled to the benefits of this Agreement. 
 Section 4.05 Amendments
to Second Lien Documents.
 (a) Prior to the Discharge of Priority Lien Obligations, without the prior written consent of the Priority
Lien Agent, no Second Lien Document may be amended, supplemented, restated or otherwise modified and/or refinanced or entered into to the extent such amendment, supplement, restatement or modification and/or refinancing, or the terms of any new
Second Lien Document, would (i) adversely affect the lien priority rights of the Priority Lien Secured Parties or the rights of the Priority Lien Secured Parties to receive payments owing pursuant to the Priority Lien Documents, (ii) except as
otherwise provided for in this Agreement, add any Liens securing the Collateral granted under the Second Lien Security Documents, (iii) confer any additional rights on the Second Lien Collateral Agent or any other Second Lien Secured Party in a
manner adverse to the Priority Lien Secured Parties, (iv) contravene the provisions of this Agreement or the Priority Lien Documents or (v) modify any Second Lien Document in any manner that would not have been permitted under the Priority Lien
Documents to have been included in such Second Lien Document if such Second Lien Document was entered into as of the date of such amendment, supplement, restatement or modification and 

Section 4.06 Legends. Each of 

(a) the Priority Lien Agent acknowledges with respect to the Priority Credit Agreement and the Priority Lien Security Documents, and 

(b) the Second Lien Collateral Agent acknowledges with respect to each Second Lien Indenture and the Second Lien Security Documents, that each
Second Lien Indenture, the Second Lien Documents (other than control agreements to which both the Priority Lien Agent and the Second Lien Collateral Agent are parties), and each associated Security Document (other than control agreements to which
both the Priority Lien Agent and the Second Lien Collateral Agent are parties) granting any security interest in the Collateral will contain the appropriate legend set forth on Annex I. 

Section 4.07 Second Lien Secured Parties as Unsecured Creditors; Judgment Lien Creditor. Both before and during an Insolvency or
Liquidation Proceeding, any of the Second Lien Secured Parties may take any actions and exercise any and all rights that would be 

  
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available to a holder of unsecured claims; provided, however, that the Second Lien Secured Parties may not take any of the actions prohibited by
Section 3.05(a) or clauses (b) through (f) of Section 4.02 or any other provisions in this Agreement; provided, further, that in the event that any of the Second Lien Secured Parties
becomes a judgment lien creditor in respect of any Collateral as a result of its enforcement of its rights as an unsecured creditor with respect to the Second Lien Obligations, such judgment lien shall be subject to the terms of this Agreement for
all purposes (including in relation to the Priority Lien Obligations) as the Second Liens, are subject to this Agreement. 
 Section 4.08
Postponement of Subrogation. The Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, hereby agrees that no payment or distribution to any Priority Lien Secured Party pursuant to the provisions
of this Agreement shall entitle any Second Lien Secured Party to exercise any rights of subrogation in respect thereof until, in the case of the Second Lien Secured Parties, the Discharge of Priority Lien Obligations. Following the Discharge of
Priority Lien Obligations, but subject to the reinstatement as provided in Section 4.03, each Priority Lien Secured Party will execute such documents, agreements, and instruments as any Second Lien Secured Party may
reasonably request to evidence the transfer by subrogation to any such Person of an interest in the Priority Lien Obligations resulting from payments or distributions to such Priority Lien Secured Party by such Person, so long as all costs and
expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by such Priority Lien Secured Party are paid by such Person upon request for payment thereof. 

Section 4.09 Acknowledgment by the Secured Debt Representatives. The Priority Lien Agent, for itself and on behalf of the other
Priority Lien Secured Parties and the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, hereby acknowledges that this Agreement is a material inducement to enter into a business relationship, that each
has relied on this Agreement to enter into the Priority Credit Agreement, each Second Lien Indenture, as applicable, and all documentation related thereto, and that each will continue to rely on this Agreement in their related future dealings. 

ARTICLE V. 
 GRATUITOUS
BAILMENT FOR PERFECTION 
 OF CERTAIN SECURITY INTERESTS 

Section 5.01 General. Prior to the Discharge of Priority Lien Obligations, the Priority Lien Agent agrees that if it shall at any
time hold a Priority Lien on any Collateral that can be perfected by the possession or control of such Collateral or of any Account in which such Collateral is held, and if such Collateral or any such Account is in fact in the possession or under
the control of the Priority Lien Agent, the Priority Lien Agent will serve as gratuitous bailee or agent for the Second Lien Collateral Agent for the sole purpose of perfecting the Second Lien of the Second Lien Collateral Agent on such
Collateral. It is agreed that the obligations of the Priority Lien Agent and the rights of the Second Lien Collateral Agent and the other Second Lien Secured Parties in connection with any such bailment or agency arrangement will be in all
respects subject to the provisions of Article II. Notwithstanding anything to the contrary herein, the Priority Lien Agent will be deemed to make no 

  
 29 

 
representation as to the adequacy of the steps taken by it to perfect the Second Lien on any such Collateral and shall have no responsibility, duty, obligation or liability to the Second Lien
Collateral Agent or any other Second Lien Secured Party, or any other Person for such perfection or failure to perfect, it being understood that the sole purpose of this Article is to enable the Second Lien Secured Parties to obtain a perfected
Second Lien to the extent, if any, that such perfection results from the possession or control of such Collateral or any such Account by the Priority Lien Agent. The Priority Lien Agent acting pursuant to this
Section 5.01 shall not have by reason of the Priority Lien Security Documents, the Second Lien Security Documents, this Agreement or any other document or theory, a fiduciary relationship in respect of any Priority Lien
Secured Party, the Second Lien Collateral Agent or any Second Lien Secured Party. Subject to Section 4.03, from and after the Discharge of Priority Lien Obligations, the Priority Lien Agent shall take all such actions
in its power as shall reasonably be requested by the Second Lien Collateral Agent (at the sole cost and expense of the Grantors) to transfer possession or control of such Collateral or any such Account (in each case to the extent the Second Lien
Collateral Agent has a Lien on such Collateral or Account after giving effect to any prior or concurrent releases of Liens) to the Second Lien Collateral Agent for the benefit of all Second Lien Secured Parties. 

Section 5.02 Deposit Accounts. Prior to the Discharge of Priority Lien Obligations, to the extent that any Account is under the
control of the Priority Lien Agent at any time, the Priority Lien Agent will act as gratuitous bailee or agent for the Second Lien Collateral Agent for the purpose of perfecting the Liens of the Second Lien Secured Parties in such Accounts and the
cash and other assets therein as provided in Section 3.01 (but will have no duty, responsibility or obligation to the Second Lien Secured Parties (including, without limitation, any duty, responsibility or obligation as to
the maintenance of such control, the effect of such arrangement or the establishment of such perfection) except as set forth in the last sentence of this Section 5.02(a)). Unless the Second Liens on such Collateral
shall have been or concurrently are released, after the occurrence of Discharge of Priority Lien Obligations, the Priority Lien Agent shall, at the request of the Second Lien Collateral Agent, cooperate with the Grantors and the Second Lien
Collateral Agent (at the expense of the Grantors) in permitting control of any other Accounts to be transferred to the Second Lien Collateral Agent (or for other arrangements with respect to each such Accounts satisfactory to the Second Lien
Collateral Agent to be made). 
 ARTICLE VI. 

APPLICATION OF PROCEEDS; DETERMINATION OF AMOUNTS 

Section 6.01 Application of Proceeds. Regardless of whether an Insolvency or Liquidation Proceeding has been commenced, Collateral
or Proceeds received in connection with the enforcement or exercise of any rights or remedies with respect to any portion of the Collateral will be applied: 

(i) first, to the payment in full in cash of all Priority Lien Obligations that are not Excess Priority Lien Obligations in accordance
with the Priority Lien Intercreditor Agreement, 

  
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 (ii) second, to the payment in full in cash of all Second Lien Obligations, as follows:

 (x) first, to the payment in full in cash of all unpaid fees, expenses, reimbursements and indemnification amounts incurred by
the Second Lien Collateral Agent and all fees owed to it in connection with such collection or sale or otherwise in connection with this Agreement or of the Second Lien Documents; and 

(y) second, to the payment in full in cash of the Second Lien Obligations, including any interest, fees, costs, expenses, charges or
other amounts, pro rata in accordance with the relative amounts thereof on the date of any payment or distribution; 
 (iii) third,
to the payment in full in cash of all Excess Priority Lien Obligations in accordance with the Priority Lien Intercreditor Agreement, and 

(iv) fourth, to Comstock or as otherwise required by applicable law. 

Section 6.02 Determination of Amounts. Whenever a Secured Debt Representative shall be required, in connection with the exercise
of its rights or the performance of its obligations hereunder, to determine the existence or amount of any Priority Lien Obligations (or the existence of any commitment to extend credit that would constitute Priority Lien Obligations) or Second Lien
Obligations, or the existence of any Lien securing any such obligations, or the Collateral subject to any such Lien, it may request that such information be furnished to it in writing by the other Secured Debt Representatives and shall be entitled
to make such determination on the basis of the information so furnished; provided, however, that if a Secured Debt Representative shall fail or refuse reasonably promptly to provide the requested information, the requesting Secured
Debt Representative shall be entitled to make any such determination by such method as it may, in the exercise of its good faith judgment, determine, including by reliance upon a certificate of Comstock. Each Secured Debt Representative may
rely conclusively, and shall be fully protected in so relying, on any determination made by it in accordance with the provisions of the preceding sentence (or as otherwise directed by a court of competent jurisdiction) and shall have no liability to
Comstock or any of its subsidiaries, any Secured Party or any other Person as a result of such determination. 
 ARTICLE VII. 

NO RELIANCE; NO LIABILITY; OBLIGATIONS ABSOLUTE; 

CONSENT OF GRANTORS; ETC. 

Section 7.01 No Reliance; Information. The Priority Lien Secured Parties and the Second Lien Secured Parties shall have no duty to
disclose to any Second Lien Secured Party or to any Priority Lien Secured Party, as the case may be, any information relating to Comstock or any of the other Grantors, or any other circumstance bearing upon the risk of non-payment of any of the
Priority Lien Obligations or the Second Lien Obligations, as the case may be, that is known or becomes known to any of them or any of their Affiliates. In the event any Priority Lien Secured Party, or any Second Lien Secured Party, in its sole
discretion, undertakes at any time or from time to time to provide any such information to, any Second Lien Secured Party or 

  
 31 

 
any Priority Lien Secured Party, as the case may be, it shall be under no obligation (a) to make, and shall not make or be deemed to have made, any express or implied representation or warranty,
including with respect to the accuracy, completeness, truthfulness or validity of the information so provided, (b) to provide any additional information or to provide any such information on any subsequent occasion or (c) to undertake any
investigation. 
 Section 7.02 No Warranties or Liability.

(a) The Priority Lien Agent, for itself and on behalf of the other Priority Lien Secured Parties, acknowledges and agrees that, except for the
representations and warranties set forth in Article VIII, neither the Second Lien Collateral Agent, nor any other Second Lien Secured Party has made any express or implied representation or warranty, including with respect
to the execution, validity, legality, completeness, collectability or enforceability of any of the Second Lien Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon. 

(b) The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, acknowledges and agrees that, except
for the representations and warranties set forth in Article VIII, neither the Priority Lien Agent nor any other Priority Lien Secured Party has made any express or implied representation or warranty, including with respect
to the execution, validity, legality, completeness, collectability or enforceability of any of the Priority Lien Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon. 

(c) The Priority Lien Agent and the other Priority Lien Secured Parties shall have no express or implied duty to the Second Lien Collateral
Agent, or any other Second Lien Secured Party, the Second Lien Collateral Agent, and the other Second Lien Secured Parties shall have no express or implied duty to the Priority Lien Agent or any other Priority Lien Secured Party, to act or refrain
from acting in a manner which allows, or results in, the occurrence or continuance of a default or an event of default under any Priority Lien Document and any Second Lien Document (other than, in each case, this Agreement), regardless of any
knowledge thereof which they may have or be charged with. 
 (d) The Second Lien Collateral Agent, for itself and on behalf of each other
Second Lien Secured Party, hereby waives any claim that may be had against the Priority Lien Agent or any other Priority Lien Secured Party arising out of any actions which the Priority Lien Agent or such Priority Lien Secured Party takes or omits
to take (including actions with respect to the creation, perfection or continuation of Liens on any Collateral, actions with respect to the foreclosure upon, sale, release or depreciation of, or failure to realize upon, any Collateral, and actions
with respect to the collection of any claim for all or only part of the Priority Lien Obligations from any account debtor, guarantor or any other party) in accordance with this Agreement and the Priority Lien Documents or the valuation, use,
protection or release of any security for such Priority Lien Obligations. 

  
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 Section 7.03 Obligations Absolute. The Lien priorities provided for herein and the
respective rights, interests, agreements and obligations hereunder of the Priority Lien Agent and the other Priority Lien Secured Parties and the Second Lien Collateral Agent, and the other Second Lien Secured Parties shall remain in full force and
effect irrespective of: 
 (a) any lack of validity or enforceability of any Secured Debt Document; 

(b) any change in the time, place or manner of payment of, or in any other term of (including the Replacing of), all or any portion of the
Priority Lien Obligations, it being specifically acknowledged that a portion of the Priority Lien Obligations consists or may consist of Indebtedness that is revolving in nature, and the amount thereof that may be outstanding at any time or from
time to time may be increased or reduced and subsequently reborrowed; 
 (c) any amendment, waiver or other modification, whether by course
of conduct or otherwise, of any Secured Debt Document; 
 (d) the securing of any Priority Lien Obligations or Second Lien Obligations with
any additional collateral or guarantees, or any exchange, release, voiding, avoidance or non-perfection of any security interest in any Collateral or any other collateral or any release of any guarantee securing any Priority Lien Obligations or
Second Lien Obligations; 
 (e) the commencement of any Insolvency or Liquidation Proceeding in respect of Comstock or any other Grantor; or

 (f) any other circumstances that otherwise might constitute a defense available to, or a discharge of, Comstock or any other Grantor in
respect of the Priority Lien Obligations or the Second Lien Obligations. 
 Section 7.04 Grantors Consent. Each Grantor hereby
consents to the provisions of this Agreement and the intercreditor arrangements provided for herein and agrees that the obligations of the Grantors under the Secured Debt Documents will in no way be diminished or otherwise affected by such
provisions or arrangements (except as expressly provided herein). 
 ARTICLE VIII. 

REPRESENTATIONS AND WARRANTIES 

Section 8.01 Representations and Warranties of Each Party. Each party hereto represents and warrants to the other parties hereto
as follows: 
 (a) Such party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority to enter into and perform its obligations under this Agreement. 
 (b) This Agreement
has been duly executed and delivered by such party. 
 (c) The execution, delivery and performance by such party of this Agreement (i) do
not require any consent or approval of, registration or filing with or any other action by any Governmental Authority of which the failure to obtain could reasonably be expected to have a Material Adverse Effect (as defined in the Priority Credit
Agreement), (ii) will not violate any 

  
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applicable law or regulation or any order of any Governmental Authority or any indenture, agreement or other instrument binding upon such party which could reasonably be expected to have a
Material Adverse Effect and (iii) will not violate the charter, by-laws or other organizational documents of such party. 
 Section 8.02
Representations and Warranties of Each Representative. Each of the Priority Lien Agent and the Second Lien Collateral Agent represents and warrants to the other parties hereto that it has been directed under the Priority Credit Agreement
and the Second Lien Indentures, as the case may be, to enter into this Agreement. 
 ARTICLE IX. 

MISCELLANEOUS 
 Section
9.01 Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: 

(a) if to the Original Priority Lien Agent, to it at: 

Bank of Montreal 
 700
Louisiana, Suite 2100 
 Houston, Texas 77002 

Facsimile: 713-223-4007 

Attention: James V. Ducote 

(b) if to the Original Second Lien Collateral Agent, to it at: 

Bank of Montreal 
 700
Louisiana, Suite 2100 
 Houston, Texas 77002 

Facsimile: 713-223-4007 

Attention: James V. Ducote 

(c) if to any other Secured Debt Representative, to such address as specified in the Priority Confirmation Joinder. 

Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt (if a business day) and on the next business day thereafter (in
all other cases) if delivered by hand or overnight courier service or sent by telecopy or on the date five business days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. As agreed to in writing among Comstock, the
other Grantors the Priority Lien Agent and the Second Lien Collateral Agent from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to
time by such person. 

  
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 Section 9.02 Waivers; Amendment. (a) No failure or delay on the part of any party
hereto in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereto are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any
provision of this Agreement or consent to any departure by any party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 9.02, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given. No notice or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in similar or other circumstances. 

(b) Neither this Agreement nor any provision hereof may be terminated, waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by each Secured Debt Representative; provided, however, that this Agreement may be amended from time to time as provided in Section 4.04. Any amendment of this Agreement
that is proposed to be effected without the consent of a Secured Debt Representative as permitted by the proviso to the preceding sentence shall be submitted to such Secured Debt Representative for its review at least 5 business days prior to the
proposed effectiveness of such amendment. 
 Section 9.03 Actions Upon Breach; Specific Performance. (a) Prior to the
Discharge of Priority Lien Obligations, if any Second Lien Secured Party, contrary to this Agreement, commences or participates in any action or proceeding against any Grantor or the Collateral, such Grantor, with the prior written consent of the
Priority Lien Agent, may interpose as a defense or dilatory plea the making of this Agreement, and any Priority Lien Secured Party may intervene and interpose such defense or plea in its or their name or in the name of such Grantor. 

(b) Prior to the Discharge of Priority Lien Obligations, should any Second Lien Secured Party, contrary to this Agreement, in any way take,
attempt to or threaten to take any action with respect to the Collateral (including any attempt to realize upon or enforce any remedy with respect to this Agreement), or take any other action in violation of this Agreement or fail to take any action
required by this Agreement, the Priority Lien Agent or any other Priority Lien Secured Party (in its own name or in the name of the relevant Grantor) or the relevant Grantor, with the prior written consent of the Priority Lien Agent, (A) may obtain
relief against such Second Lien Secured Party, by injunction, specific performance and/or other appropriate equitable relief, it being understood and agreed by each of the Second Lien Collateral Agent on behalf of each Second Lien Secured Party that
(I) the Priority Lien Secured Parties’ damages from its actions may at that time be difficult to ascertain and may be irreparable, and (II) each Second Lien Secured Party waives any defense that the Grantors and/or the Priority Lien Secured
Parties cannot demonstrate damage and/or be made whole by the awarding of damages, and (B) shall be entitled to damages, as well as reimbursement for all reasonable and documented costs and expenses incurred in connection with any action to enforce
the provisions of this Agreement. 

  
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 Section 9.04 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns, as well as the other Secured Parties, all of whom are intended to be bound by, and to be third party beneficiaries of, this Agreement. 

Section 9.05 Survival of Agreement. All covenants, agreements, representations and warranties made by any party in this Agreement
shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement. 

Section 9.06 Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original but all of
which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. 

Section 9.07 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 
 Section 9.08 Governing Law;
Jurisdiction; Consent to Service of Process. (a) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATION LAW). 
 (b) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement in the courts
of any jurisdiction. 
 (c) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section 9.08. Each
of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 

(d) Each party to this Agreement irrevocably consents to service of process in the manner `provided for notices in
Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 

  
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 Section 9.09 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 
 Section 9.10 Headings. Article,
Section and Annex headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. 

Section 9.11 Conflicts. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions
of any Secured Debt Documents, the provisions of this Agreement shall control. 
 Section 9.12 Provisions Solely to Define Relative
Rights. The provisions of this Agreement are and are intended solely for the purpose of defining the distinct and separate relative rights of the Priority Lien Secured Parties and the Second Lien Secured Parties. None of Comstock, any
other Grantor or any other creditor thereof shall have any rights or obligations hereunder, except as expressly provided in this Agreement (provided that nothing in this Agreement is intended to or will amend, waive or otherwise modify the
provisions of the Priority Lien Documents and the Second Lien Documents, as applicable), and except as expressly provided in this Agreement neither Comstock nor any other Grantor may rely on the terms hereof. Nothing in this Agreement is
intended to or shall impair the obligations of Comstock or any other Grantor, which are absolute and unconditional, to pay the Obligations under the Secured Debt Documents as and when the same shall become due and payable in accordance with their
terms. Notwithstanding anything to the contrary herein or in any Secured Debt Document, the Grantors shall not be required to act or refrain from acting pursuant to this Agreement, any Priority Lien Document or any Second Lien Document with
respect to any Collateral in any manner that would cause a default under any Priority Lien Document. 
 Section 9.13 Certain Terms
Concerning the Second Lien Collateral Agent. The Second Lien Collateral Agent is executing and delivering this Agreement solely in its capacity as such and pursuant to direction set forth in each Second Lien Indenture; and in so doing, the
Second Lien Collateral Agent shall not be responsible for the terms or sufficiency of this Agreement for any purpose. The Second Lien Collateral Agent shall have no duties or obligations under or pursuant to this Agreement other than such
duties and obligations as may be expressly set forth in this Agreement as duties and obligations on its part to be performed or observed. In entering 

  
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into this Agreement, or in taking (or forbearing from) any action under or pursuant to the Agreement, the Second Lien Collateral Agent shall have and be protected by all of the rights,
immunities, indemnities and other protections granted to it under any Second Lien Indenture and the other Second Lien Documents. 
 Section
9.14 Certain Terms Concerning the Priority Lien Agent and Second Lien Collateral Agent. None of the Priority Lien Agent or the Second Lien Collateral Agent shall have any liability or responsibility for the actions or omissions of any
other Secured Party, or for any other Secured Party’s compliance with (or failure to comply with) the terms of this Agreement. None of the Priority Lien Agent or the Second Lien Collateral Agent shall have individual liability to any
Person if it shall mistakenly pay over or distribute to any Secured Party (or Comstock or any other Grantor) any amounts in violation of the terms of this Agreement, so long as the Priority Lien Agent or the Second Lien Collateral Agent, as the case
may be, is acting in good faith. Each party hereto hereby acknowledges and agrees that each of the Priority Lien Agent and the Second Lien Collateral Agent is entering into this Agreement solely in its capacity under the Priority Lien Documents
and the Second Lien Documents, respectively, and not in its individual capacity. The Priority Lien Agent shall not be deemed to owe any fiduciary duty to the Second Lien Collateral Agent or any other Second Lien Secured Party and the Second
Lien Collateral Agent shall not be deemed to owe any fiduciary duty to the Priority Lien Agent or any other Priority Lien Secured Party. 

Section 9.15 Authorization of Secured Agents. By accepting the benefits of this Agreement and the other Priority Lien Security
Documents, each Priority Lien Secured Party authorizes the Priority Lien Agent to enter into this Agreement and to act on its behalf as collateral agent hereunder and in connection herewith. By accepting the benefits of this Agreement and the
other Second Lien Security Documents, each Second Lien Secured Party authorizes the Second Lien Collateral Agent to enter into this Agreement and to act on its behalf as collateral agent hereunder and in connection herewith.

Section 9.16 Further Assurances. The Priority Lien Agent, for itself and on behalf of the other Priority Lien Secured Party and
the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, and each Grantor party hereto, for itself and on behalf of its subsidiaries, agrees that it will execute, or will cause to be executed, any and all
further documents, agreements and instruments, and take all such further actions, as may be required under any applicable law, or which the Priority Lien Agent or the Second Lien Collateral Agent may reasonably request, to effectuate the terms of
this Agreement, including the relative Lien priorities provided for herein. 
 Section 9.17 Relationship of Secured
Parties. Nothing set forth herein shall create or evidence a joint venture, partnership or an agency or fiduciary relationship among the Secured Parties. None of the Secured Parties nor any of their respective directors, officers,
agents or employees shall be responsible to any other Secured Party or to any other Person for any Grantor’s solvency, financial condition or ability to repay the Priority Lien Obligations or the Second Lien Obligations, or for statements of
any Grantor, oral or written, or for the validity, sufficiency or enforceability of the Priority Lien Documents or the Second Lien Documents, or any security interests granted by any Grantor to any Secured Party in connection therewith. Each
Secured Party has entered into its respective financing agreements with the Grantors based 

  
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upon its own independent investigation, and none of the Priority Lien Agent or the Second Lien Collateral Agent makes any warranty or representation to the other Secured Debt Representatives or
the Secured Parties for which it acts as agent nor does it rely upon any representation of the other agents or the Secured Parties for which it acts as agent with respect to matters identified or referred to in this Agreement. 

Section 9.18 Resignation of Agent. Any Agent may at any time give written notice of its resignation as Agent under this Agreement
and the other Security Documents to each Authorized Representative and Comstock. Upon receipt of any such notice of resignation, the applicable Authorized Representative shall have the right (subject, unless an event of default under any
Secured Debt Document relating to the commencement of an Insolvency or Liquidation Proceeding has occurred and is continuing, to the consent of Comstock (not to be unreasonably withheld or delayed) in consultation with Comstock to appoint a
successor, which shall be a bank or trust company with an office in the United States, or an Affiliate of any such bank or trust company with an office in the United States. If no such successor shall have been so appointed by the applicable
Authorized Representative and shall have accepted such appointment within 30 days after the retiring Agent give notice of its resignation, then the retiring Agent may, appoint a successor Agent meeting the qualifications set forth above (but
without the consent of any other Secured Party or Comstock); provided that if the Agent shall notify Comstock and each Authorized Representative that no qualifying Person has accepted such appointment, then such resignation shall nonetheless
become effective in accordance with such notice and (a) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Security Documents (except that in the case of any collateral security held by the Agent of
behalf of the Secured Parties, the retiring Agent shall continue to hold such collateral security solely for purposes of maintaining the perfection of the security interests of the Secured Parties therein until such time as a successor Agent is
appointed but with no obligation to take any further action at the request of any other Secured Parties or any Grantor) and (b) all payments, communications and determinations provided to be made by, to or through the Agent shall instead by made by
or to each Authorized Representative directly, until such time as the applicable Authorized Agent appoints a successor Agent as provided for above in this Section. Upon the acceptance of a successor’s appoint as Priority Lien Agent or
Second Lien Agent, as the case may be, hereunder and under the Security Documents, such successor shall succeed to become vested with all of the rights, powers, privileged and duties of the retiring (or retired) Agent, and the retiring Agent shall
be discharged from all of its duties and obligations hereunder or under the Security Documents (if not already discharges therefrom as provided above in this Section). After the retiring Agent’s resignation hereunder and under the other
Collateral Agreements, the provisions of this Article, Sections 9.7, 10.4, 10.5 and 10.6 of the Revolving Credit Agreement, and 11.09 of the Priority Lien Indenture and each Second Lien Indenture, as applicable, shall continue in effect for the
benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent. Upon any notice of resignation of the Agent
hereunder and under the other Security Documents, the Grantors agree to use commercially reasonable efforts to transfer (and maintain the validity and priority of) Liens in favor of the retiring Agent under the Security Documents to the successor
Agent as promptly as practicable. 

  
 39 

 ARTICLE X. 

SECOND LIEN RIGHT TO PURCHASE 

Section 10.01 Purchase Right. Upon the occurrence and continuation of an Event of Default, as defined in and under the Priority
Lien Indenture (a “Purchase Event”), the holders of a majority of the principal amount of the Second Lien Indenture Notes (such holders, the “Purchasing Holders”) may purchase all, but not less than all, of the
Priority Lien Obligations in respect of the Priority Lien Notes (“Priority Lien Note Obligations”). Such purchase will (a) include all principal of, and all accrued and unpaid interest, fees, and expenses in respect of,
all Priority Lien Note Obligations outstanding at the time of purchase, (b) be made pursuant to a master assignment agreement, whereby the Purchasing Holders will assume all Priority Lien Note Obligations, and (c) otherwise be subject to the terms
and conditions of this Article X. Each Priority Lien Secured Party will retain all rights to indemnification provided in the relevant Priority Lien Documents for all claims and other amounts relating to periods prior to the purchase of the
Priority Lien Note Obligations pursuant to this Article X. 
 Section 10.02 Purchase Notice. 

(a) The Purchasing Holders will deliver a purchase notice (the “Purchase Notice”) to the Priority Lien Agent no later than twenty
(20) Business Days after the Purchase Event, that (1) is signed by the Purchasing Holders, (2) states that it is a Purchase Notice under this Article X, (3) states that each Purchasing Holder is irrevocably electing to purchase, in accordance with
this Article X, the percentage of all of the Priority Lien Note Obligations stated in the Purchase Notice for that Purchasing Holder, which percentages must aggregate exactly 100% for all Purchasing Holders, (4) represents and warrants that the
Purchase Notice is in conformity with the Second Lien Documents and any other binding agreement among the Second Lien Secured Parties, and (5) designates a date (the “Purchase Date”) on which the purchase will occur, that is at
least five (5) Business Days but not more than twenty (20) Business Days after the Priority Lien Agent’s receipt of the Purchase Notice. A Purchase Notice will be ineffective if it is received by the Priority Lien Agent after the
occurrence giving rise to the Purchase Event is waived, cured, or otherwise ceases to exist. 
 (b) Upon the Priority Lien Agent’s
receipt of an effective Purchase Notice conforming to this Section 10.02, the Purchasing Holders will be irrevocably obligated to purchase, and the Priority Lien Secured Parties will be irrevocably obligated to sell, the Priority Lien Note
Obligations in accordance with and subject to this Article X. 
 Section 10.03 Purchase Price. The Purchase Price for the
Priority Lien Note Obligations will equal the sum of: 
 (a) the principal amount of all Priority Lien Notes included in the Priority Lien
Note Obligations, and all accrued and unpaid interest thereon through the Purchase Date, and 
 (b) all accrued and unpaid fees, expenses,
and other amounts (including any make-whole or prepayment premium) owed to the Priority Lien Secured Parties in respect of the Priority Lien Note Obligations under the Priority Lien Documents on the Purchase Date. 

  
 40 

 Section 10.04 Purchase Closing. On the Purchase Date, 

(a) the Purchasing Holders and the Priority Lien Agent will execute and deliver the master assignment agreement, 

(b) the Purchasing Holders will pay the Purchase Price to the Priority Lien Agent by wire transfer of immediately available funds, 

(c) the Second Lien Collateral Agent will execute and deliver to the Priority Lien Agent a waiver of all claims arising out of this Agreement
and the transactions contemplated hereby as a result of exercising the purchase option contemplated by this Article X; and 
 (d) the
Purchasing Holders will deliver to the Priority Lien Agent any and all further documents, agreements and instruments, and take all such further actions, as may be required under any applicable law, or which the Priority Lien Agent may reasonably
request, to confirm that the Purchasing Holders will be bound by, and will take no actions contrary to, the provisions of the Priority Lien Intercreditor Agreement. 

Section 10.05 Actions After Purchase Closing. Promptly after the closing of the purchase of all Priority Lien Note
Obligations, the Priority Lien Agent will distribute the Purchase Price to the Priority Lien Trustee, which will promptly distribute the Purchase Price to the Priority Lien Secured Parties in accordance with the terms of the Priority Lien Indenture.

 Section 10.06 No Recourse or Warranties; Defaulting Priority Lien Secured Parties. 

(a) The Priority Lien Secured Parties will be entitled to rely on the statements, representations, and warranties in the Purchase Notice
without investigation, even if the Priority Lien Secured Parties are notified that any such statement, representation, or warranty is not or may not be true. 

(b) The purchase and sale of the Priority Lien Note Obligations under this Article X will be without recourse and without representation or
warranty whatsoever by the Priority Lien Secured Parties, except that the Priority Lien Secured Parties represent and warrant that on the Purchase Date, immediately before giving effect to the purchase, the Priority Lien Secured Parties have the
right to convey whatever claims and interests they may have in respect of the Priority Lien Note Obligations. 
 (c) The obligations of the
Priority Lien Secured Parties to sell their respective Priority Lien Note Obligations under Section 10.02(b) are several and not joint and several. If a Priority Lien Secured Party (a “Defaulting Priority Lien Secured
Party”) breaches its obligation to sell its Priority Lien Note Obligations under this Section 10.02(b), no other Priority Lien Secured Party will be obligated to purchase the Defaulting Priority Lien Secured Party’s Priority Lien
Obligations for resale to the holders of Second Lien Obligations. A Priority Lien Secured Party that complies with this Article X will not be in default of this Agreement or otherwise be deemed liable for any action or inaction of any
Defaulting Priority Lien Secured Party, provided that nothing in this subsection (c) will require the Purchasing Holders to purchase less than all of the Priority Lien Note Obligations. 

  
 41 

 (d) The Grantors irrevocably consent to any assignment effected to one or more Purchasing Holders
pursuant to this Article X. 
 [SIGNATURES BEGIN NEXT PAGE] 

  
 42 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written. 
  

			
	BANK OF MONTREAL, as Priority Lien Agent
		
	By:	 	  

		
	Name:	 	  

		
	Title:	 	  

	
	BANK OF MONTREAL, as Second Lien Collateral Agent
		
	By:	 	  

		
	Name:	 	  

		
	Title:	 	  

  
 Signature Page 

Intercreditor Agreement 

 
					
	ACKNOWLEDGED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
	
	COMSTOCK RESOURCES, INC.
		
	By:	 	  

		
	Name:	 	  

		
	Title:	 	  

	
	COMSTOCK OIL & GAS GP, LLC,
		
	By:	 	Comstock Resources, Inc., its sole member
			
		 	By:	 	  

		 	Name:	 	  

		 	Title:	 	  

	
	COMSTOCK OIL & GAS INVESTMENTS, LLC
		
	By:	 	  

	Name:	 	  

	Title:	 	  

  
 Signature Page 

Intercreditor Agreement 

 
					
	COMSTOCK OIL & GAS, LP,
		
	By:	 	Comstock Oil & Gas GP, LLC, its general partner
		
	By:	 	Comstock Resources, Inc., its sole member
			
		 	By:	 	  

		 	Name:	 	  

		 	Title:	 	  

	
	COMSTOCK OIL & GAS HOLDINGS, INC.
		
	By:	 	  

	Name:	 	  

	Title:	 	  

	
	COMSTOCK OIL & GAS – LOUISIANA, LLC
		
	By:	 	  

	Name:	 	  

	Title:	 	  

	
	Address for each Grantor:
	
	5300 Town and Country Blvd., Suite 500
	Frisco, Texas 75034
	Attn: Roland O. Burns

  
 Signature Page 

Intercreditor Agreement 

 ANNEX I 

Provision for the Second Lien Indenture and the Second Lien Documents 

Reference is made to the Junior Lien Intercreditor Agreement, dated as of [●], 2016, between BANK OF MONTREAL, as Priority Lien Agent
(as defined therein), and BANK OF MONTREAL, as Second Lien Collateral Agent (as defined therein) (the “Intercreditor Agreement”). Each holder of Second Lien Obligations, by its acceptance of such Second Lien Obligations
i) consents to the subordination of Liens provided for in the Intercreditor Agreement, ii) agrees that it will be bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement and iii) authorizes and
instructs the Second Lien Collateral Agent on behalf of each Second Lien Secured Party (as defined therein) to enter into the Intercreditor Agreement as Second Lien Collateral Agent on behalf of such Second Lien Secured Parties. The foregoing
provisions are intended as an inducement to the lenders under the Priority Credit Agreement to extend credit to Comstock Resources, Inc. and such lenders are intended third party beneficiaries of such provisions and the provisions of the
Intercreditor Agreement. 
 Provision for all Priority Lien Security Documents and Second Lien Security Documents 

Reference is made to the Junior Lien Intercreditor Agreement, dated as of [●], 2016, between BANK OF MONTREAL, as Priority Lien Agent
(as defined therein), and BANK OF MONTREAL, as Second Lien Collateral Agent (as defined therein) (the “Intercreditor Agreement”). Each Person that is secured hereunder, by accepting the benefits of the security provided hereby, [(i)
consents (or is deemed to consent), to the subordination of Liens provided for in the Intercreditor Agreement,]1 [(i)][(ii)] agrees (or is deemed to agree) that it will be bound by, and will take
no actions contrary to, the provisions of the Intercreditor Agreement, [(ii)][(iii)] authorizes (or is deemed to authorize) the [Priority Lien Agent] [Second Lien Collateral Agent] on behalf of such Person to enter into, and perform under, the
Intercreditor Agreement and [(iii)][(iv)] acknowledges (or is deemed to acknowledge) that a copy of the Intercreditor Agreement was delivered, or made available, to such Person. 

Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided
for herein are subject in all respects to the provisions of the Intercreditor Agreement and, to the extent provided therein, the applicable Security Documents (as defined in the Intercreditor Agreement). In the event of any conflict or
inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. 

 

	1 	This bracketed language would not apply to the Priority Lien Security Documents. 

  
 Annex I - 1 

 EXHIBIT A 

to Junior Lien Intercreditor Agreement 

[FORM OF] 
 PRIORITY
CONFIRMATION JOINDER 
 Reference is made to the Junior Lien Intercreditor Agreement, dated as of
            , 2016 (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the “Intercreditor Agreement”) between BANK OF
MONTREAL, as Priority Lien Agent for the Priority Lien Secured Parties (as defined therein), and BANK OF MONTREAL, as Second Lien Collateral Agent for the Second Lien Secured Parties (as defined therein). 

Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Intercreditor Agreement. 

1. Joinder. The undersigned,
[                    ], a [                    ],
(the “New Representative”) as [trustee] [collateral trustee] [administrative agent] [collateral agent] under that certain [describe applicable indenture, credit agreement or other document governing the Additional Second Lien
Obligations] hereby: 
 (a) represents that the New Representative has been authorized to become a party to the Intercreditor Agreement
on behalf of the [Priority Lien Secured Parties under a Priority Substitute Credit Facility] [Second Lien Secured Parties under the Second Lien Substitute Facility] as [a Priority Lien Agent under a Priority Substitute Credit Facility] [a Second
Lien Collateral Agent under a Second Lien Substitute Facility] [Secured Debt Representative] under the Intercreditor Agreement for all purposes thereof on the terms set forth therein, and to be bound by the terms of the Intercreditor Agreement as
fully as if the undersigned had executed and delivered the Intercreditor Agreement as of the date thereof; and 
 (b) agrees that its
address for receiving notices pursuant to the Intercreditor Agreement shall be as follows: 
 [Address]; 

2. Priority Confirmation. 

[Option A: to be used if additional debt constitutes Priority Debt] The undersigned New Representative, on behalf of
itself and each Priority Lien Secured Party for which the undersigned is acting as [Administrative Agent] hereby agrees, for the benefit of all Secured Parties and each future Secured Debt Representative, and as a condition to being treated as
Priority Lien Obligations under the Intercreditor Agreement, that the New Representative is bound by the provisions of the Intercreditor Agreement, including the provisions relating to the ranking of Priority Liens. [or] 

[Option B: to be used if additional debt constitutes Second Lien Debt] The undersigned New Representative, on behalf
of itself and each holder of Obligations in respect of the Second Lien Debt that constitutes Second Lien Substitute Facility for which the undersigned is acting as 

  
 Exhibit A - 1 

 
Second Lien Collateral Agent hereby agrees, for the benefit of all Secured Parties and each future Secured Debt Representative, and as a condition to being treated as Secured Debt under the
Intercreditor Agreement, that: 
 (a) all Second Lien Obligations will be and are secured equally and ratably by all Second Liens at any
time granted by Comstock or any other Grantor to secure any Obligations in respect of the Second Lien Debt, whether or not upon property otherwise constituting Collateral for the Second Lien Debt, and that all such Second Liens will be enforceable
by the Second Lien Collateral Agent with respect to the Second Lien Debt for the benefit of all Second Lien Secured Parties equally and ratably; 

(b) the New Representative and each holder of Obligations in respect of the Second Lien Debt for which the undersigned is acting are bound by
the provisions of the Intercreditor Agreement, including the provisions relating to the ranking of Priority Liens and Second Liens and the order of application of proceeds from enforcement of Priority Liens and Second Liens; and 

(c) the New Representative and each holder of Obligations in respect of the Second Lien Debt for which the undersigned is acting appoints the
Second Lien Collateral Agent and consents to the terms of the Intercreditor Agreement and the performance by the Second Lien Collateral Agent of, and directs the Second Lien Collateral Agent to perform, its obligations under the Intercreditor
Agreement, the Second Lien Security Agreement and the Second Lien Pledge Agreement, together with all such powers as are reasonably incidental thereto. 

3. Full Force and Effect of Intercreditor Agreement. Except as expressly supplemented hereby, the Intercreditor Agreement shall
remain in full force and effect. 
 4. Governing Law and Miscellaneous Provisions. The provisions of
Article IX of the Intercreditor Agreement will apply with like effect to this Priority Confirmation Joinder. 
 5.
Expenses. Comstock agree to reimburse each Secured Debt Representative for its reasonable out of pocket expenses in connection with this Priority Confirmation Joinder, including the reasonable fees, other charges and disbursements of
counsel. 

  
 Exhibit A - 2 

 IN WITNESS WHEREOF, the parties hereto have caused this Priority Confirmation Joinder to be
executed by their respective officers or representatives as of [            , 20    ]. 

 

			
	[insert name of New Representative]
		
	By:	 	  

	Name:	 	  

	Title:	 	  

 The Priority Lien Agent hereby acknowledges receipt of this Priority Confirmation Joinder [and agrees to act as Priority
Lien Agent for the New Representative and the holders of the Obligations represented thereby]: 
  

			
	  

	as Priority Lien Agent
		
	By:	 	  

	Name:	 	  

	Title:	 	  

 The Second Lien Collateral Agent hereby acknowledges receipt of this Priority Confirmation Joinder [and agrees to act as
Second Lien Collateral Agent for the New Representative and the holders of the Obligations represented thereby]: 
  

			
	  

	as Second Lien Collateral Agent
		
	By:	 	  

	Name:	 	  

	Title:	 	  

  
 Exhibit A - 3 

 
			
	Acknowledged and Agreed to by:
	
	COMSTOCK RESOURCES, INC.
		
	By:	 	  

	Name:	 	  

	Title:	 	  

  
 Exhibit A - 4 

 EXHIBIT B 

to Junior Lien Intercreditor Agreement 

SECURITY DOCUMENTS 
 PART A. 

List of Priority Lien Security Documents 
  

	1.	Security Agreement dated as of March 4, 2015 among Comstock, each of the other Grantors party thereto, and the Priority Lien Agent as collateral agent for the Priority Lien Secured Parties, as amended, modified or
restated from time to time in compliance with the Priority Lien Documents. 

  

	2.	Pledge Agreement and Irrevocable Proxy dated as of March 4, 2015 among Comstock, each of the other Grantors party thereto, and the Priority Lien Agent as collateral agent for the Priority Lien Secured Parties, as
amended, modified or restated from time to time in compliance with the Priority Lien Documents. 

  

	3.	Each mortgage and deed of trust entered into pursuant to the Priority Lien Documents, executed and delivered by Comstock or any other Grantor creating (or purporting to create) a Lien upon Collateral in favor of the
Priority Lien Agent, to secure the Priority Lien Obligations, as amended, modified or restated from time to time in compliance with the Priority Lien Documents, except to the extent released by the Priority Lien Agent in accordance with this
Agreement and the Priority Lien Security Documents. 

  

	4.	Each UCC Financing Statement filed in connection with the documents listed in items 1, 2 and 3 of this Part A. 

  

	5.	Each deposit account control agreement and securities account control agreement entered into pursuant to the Priority Lien Documents among Comstock or any other Grantor, the Priority Lien Agent, the Second Lien
Collateral Agent and the applicable depositary bank or securities intermediary, as amended, modified or restated from time to time in compliance with the Priority Lien Documents. 

PART B. 
 List of Second Lien Security Documents

  

	1.	Second Lien Security Agreement dated as of [●], 2016 among Comstock, each of the other Grantors party thereto, and the Second Lien Collateral Agent as collateral agent for the
Second Lien Secured Parties, as amended, modified or restated from time to time in compliance with the Second Lien Documents. 

  

	2.	Second Lien Pledge Agreement and Irrevocable Proxy dated as of [●], 2016 among Comstock, each of the other Grantors party thereto, and the Second Lien Collateral Agent as
collateral agent for the Second Lien Secured Parties, as amended, modified or restated from time to time in compliance with the Second Lien Documents. 

  
 Exhibit B -1 

	3.	Each mortgage and deed of trust entered into on or after the date hereof, executed and delivered by Comstock or any other Grantor creating (or purporting to create) a Lien upon Collateral in favor of the Second Lien
Collateral Agent, to secure the Second Lien Obligations, as amended, modified or restated from time to time in compliance with the Intercreditor Agreement, except to the extent released by the Second Lien Collateral Agent in accordance with this
Agreement and the Second Lien Security Documents. 

  

	4.	Each UCC Financing Statement filed in connection with the documents listed in items 1, 2 and 3 of this Part B. 

  

	5.	Each deposit account control agreement and securities account control agreement entered into after the date hereof among Comstock or any other Grantor, the Priority Lien Agent, the Second Lien Collateral Agent and the
applicable depositary bank or securities intermediary, as amended, modified or restated from time to time in compliance with the Intercreditor Agreement. 

  
 Exhibit B -2Blueprint

 

Exhibit 10.1

 

THE EXCHANGE CONTEMPLATED HEREIN IS INTENDED TO COMPORT WITH THE REQUIREMENTS OF SECTION 3(a)(9) OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

Exchange Agreement

 

This Exchange Agreement (this “Agreement”) is executed as of August 17, 2016 by and between GrowLife, Inc., a Delaware corporation (the “Company”), and Chicago Venture Partners, L.P., a Utah limited partnership,
its successors and/or assigns (“Holder”). Capitalized terms not defined herein shall have the same meaning as set forth in the Initial Exchange Note (as defined below).

A. The Company previously sold and issued to TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (“TCA”), that certain Amended, Restated and Consolidated Senior Secured Convertible
Redeemable Debenture dated and made effective as of October 27, 2015 in the original principal amount of $1,050,000.00 (the “Original Debenture”).

 

B. Pursuant to that certain Debt Purchase Agreement dated August 17, 2016 between Holder and TCA (the “Purchase Agreement”), Holder agreed to purchase the Original Debenture from TCA in multiple tranches
(each, a “Tranche”).

 

C. In connection with the first Tranche purchased by Holder, TCA severed an $80,000.00 portion of the Original Debenture and the Company reissued such $80,000.00 portion as that certain First Replacement Amended, Restated and Consolidated Senior Secured
Convertible Redeemable Debenture A in the original principal amount of $80,000.00 dated and made effective as of August 17, 2016 but having an original issuance date of October 27, 2015 (the “Initial Debenture”).

 

D. Pursuant to the Purchase Agreement and with respect to each subsequent Tranche, TCA will sever additional portions of the Original Debenture and the Company will reissue such severed portions as additional First Replacement Amended, Restated and Consolidated
Senior Secured Convertible Redeemable Debentures (each, a “Subsequent Debenture”, and together with the Initial Debenture, the “Purchased Debentures”).

 

E. Subject to the terms of this Agreement, Holder and the Company desire to exchange (such exchange is referred to as the “Note Exchange”) (i) the Initial Debenture for a new Convertible Promissory Note
in the original principal amount of $128,000.00 substantially in the form attached hereto as Exhibit A (the “Initial Exchange Note”); and (ii) all other Purchased Debentures for new Convertible Promissory Notes each in substantially the form attached hereto as Exhibit B (each, a “Subsequent Exchange Note”, and together
with the Initial Exchange Note, the “Exchange Notes”). The Note Exchange will consist of Holder surrendering the Initial Debenture in return for the Initial Exchange Note and, from time to time upon the closing of additional Tranches, the surrender of Subsequent Debentures for Subsequent Exchange Notes. Other than the surrender of the Purchased Debentures, no consideration of any kind whatsoever shall be given by Holder to the Company in connection with this
Agreement.

 

F. This Agreement, the Initial Exchange Note, each Subsequent Exchange Note, the Transfer Agent Letter (as defined below), the Secretary’s Certificate (as defined below), the Share Issuance Resolution (as defined below),
the Officer’s Certificate (as defined below) and any other documents, agreements, or instruments entered into or delivered in connection with this Agreement, or any amendments to any of the foregoing, are collectively referred to as the “Exchange Documents”.

G. For purposes of this Agreement: “Conversion Shares” means all shares of Common Stock issuable upon conversion of all or any portion of any Exchange Note; and “Securities”
means the Initial Exchange Note, all Subsequent Exchange Notes, and the Conversion Shares.

 

 

 

 

H. Pursuant to the terms and conditions hereof, Holder and the Company agree to exchange the Purchased Debentures for the Exchange Notes.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the parties hereto agree as follows:

1. Issuance of Exchange Notes; Exchange Fees.

1.1. Upon execution of this Agreement, Holder will surrender the Initial Debenture to the Company and the Company will issue to Holder the Initial Exchange Note. In conjunction therewith, the Company hereby confirms that the Initial
Debenture represents the Company’s unconditional obligation to pay the outstanding balance pursuant to the terms of the Original Debenture. The Company and Holder agree that upon surrender, the Initial Debenture will be cancelled and the remaining amount owed to Holder pursuant to the Initial Debenture shall hereafter be evidenced solely by the Initial Exchange Note.

1.2. Upon each subsequent purchase of a Subsequent Debenture, Holder will surrender such Subsequent Debenture to the Company and the Company will issue to Holder a Subsequent Exchange Note. In conjunction therewith, the Company
hereby confirms that each Subsequent Debenture represents the Company’s unconditional obligation to pay the outstanding balance pursuant to the terms of the Original Debenture. The Company and Holder agree that upon surrender, the applicable Subsequent Debenture will be cancelled and the remaining amount owed to Holder pursuant to such Subsequent Debenture shall hereafter be evidenced solely by the applicable Subsequent Exchange Note.

1.3. 

The Company acknowledges that the outstanding balance of the Initial Exchange Note includes an exchange fee in the amount of $48,000.00 (the “Exchange Fee”), which sum was added to the outstanding balance of the Initial Exchange Note in consideration of the accommodations granted to the Company and the legal and other fees incurred by Holder in connection with the Note Exchange. The Company further acknowledges and agrees that an additional Exchange Fee shall
be added to the outstanding balance of each Subsequent Exchange Note that is issued hereafter in an amount bearing the same ratio to the outstanding balance of the Subsequent Debenture being exchanged as the initial Exchange Fee bears to the outstanding balance of the Initial Debenture. For illustration purposes only, if the outstanding balance of a Subsequent Debenture being exchanged is equal to $150,000.00, then the Exchange Fee included in the balance of the Subsequent Exchange Note being issued in exchange
for such Subsequent Debenture shall be equal to $90,000.00.

2. Closings.

2.1. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 3 and Section 4 below, The initial closing of the transaction contemplated hereby (the “Initial Closing”)
along with the delivery of the Initial Exchange Note and the other Exchange Documents (as defined below) shall occur on the date that is mutually agreed to by the Company and Holder (the “Initial Closing Date”) by means of the exchange by express courier and email of .pdf documents, but shall be deemed to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.

2.2. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 3 and Section 4 below, the closing of the exchange of each Subsequent Debenture (the “Subsequent
Closing”, and together with the Initial Closing, the “Closings”) and issuance of each Subsequent Exchange Note shall occur on a date that is mutually agreed upon by the Company and Holder, but in any event is not more than two (2) business days following the date on which Holder gives the Company notice that it has acquired a Subsequent Debenture and desires to exchange it for a Subsequent Exchange Note pursuant to this Agreement (the “Subsequent Closing
Date”, and together with the Initial Closing Date, the “Closing Dates”) by means of the exchange by express courier and email of .pdf documents, but shall be deemed to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.

 

 

 

3. Conditions to Company s Obligation to Exchange. The obligation of Company hereunder to exchange the Purchased Debentures for the Exchange Notes at the Closings is subject to the
satisfaction, on or before the applicable Closing Date, of each of the following conditions:

3.1. With respect to the Initial Closing, Holder shall have executed and delivered this Agreement to the Company.

3.2. With respect to each Closing, Holder shall have delivered applicable Purchased Debenture for cancellation or a lost note affidavit.

4. Conditions to Company s Obligation to Exchange. The obligation of Holder hereunder to Exchange the Purchased Debentures at the Closings is subject to the satisfaction, on or before
the applicable Closing Date, of each of the following conditions, provided that these conditions are for Holder’s sole benefit and may be waived by Holder at any time in its sole discretion:

4.1. With respect to the Initial Closing, the Company shall have executed and delivered this Agreement.

4.2. With respect to each Closing, the Company shall have executed and delivered the applicable Exchange Note.

4.3. With respect to the Initial Closing, the Company shall deliver to Holder a fully executed Letter of Instructions to Transfer Agent (“Transfer Agent Letter”) substantially
in the form attached hereto as Exhibit C acknowledged and agreed to in writing by Company’s transfer agent (the “Transfer Agent”).

4.4. With respect to the Initial Closing, the Company shall deliver to Holder a fully executed Secretary’s Certificate substantially in the form attached hereto as Exhibit D (the
“Secretary’s Certificate”) evidencing the Company’s approval of the Note Exchange and the Exchange Documents.

4.5. With respect to the Initial Closing, the Company shall deliver to Holder a fully executed Share Issuance Resolution substantially in the form attached hereto as Exhibit E (the
“Share Issuance Resolution”) to be delivered to the Transfer Agent.

4.6. With respect to each Closing, Company’s Chief Executive Officer shall have executed and delivered a certificate in substantially the form attached hereto as Exhibit F (the
“Officer’s Certificate”)

4.7. With respect to each Closing, delivery of all other Exchange Documents.

5. Holding Period, Tacking and Legal Opinion. The Company represents, warrants and agrees that for the purposes of Rule 144 (“Rule 144”)
of the Securities Act of 1933, as amended (the “Securities Act”), the holding period of each Exchange Note will include TCA’s holding period of the Original Debenture from October 27, 2015, which date is the date that the Original Debenture was issued. The Company agrees not to take a position contrary to this Section 5 in any document, statement, setting, or situation and further acknowledges that the Original Debenture has not been amended or altered
since such date. The Company represents that it is not subject to Rule 144(i). Each Exchange Notes is being issued in substitution of and exchange for and not in satisfaction of the applicable Purchased Debenture. The Exchange Notes shall not constitute a novation or satisfaction and accord of the applicable Purchased Debenture. The Company acknowledges and understands that the representations and agreements of the Company in this Section 5 are a material inducement to
Holder’s decision to consummate the transactions contemplated herein.

 

 

 

6. Representations, Warranties and Covenants of Holder. Holder represents, warrants, and covenants to the Company that:

6.1. Investment Purpose. Holder is acquiring the Securities for its own account for investment only and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, Holder reserves the right to dispose of the Conversion Shares at any time in accordance with or pursuant to an effective registration statement covering such Conversion Shares or an available exemption under the Securities Act.

6.2. Accredited Investor Status. Holder is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

6.3. Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of Holder and is a valid and binding agreement of Holder enforceable
in accordance with its terms.

6.4. Brokers. There are no brokerage commissions, finder’s fees or similar fees or commissions payable by Holder in
connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Holder or any action taken by Holder.

7. Representations, Warranties, and Covenants of the Company. The Company hereby makes the representations set forth below and covenants and agrees as follows to Holder (in addition
to those set forth elsewhere herein):

7.1. Organization and Qualification. The Company has been duly organized, validly exists and is in good standing under the laws of the State of Delaware.
The Company has full corporate power and authority to enter into this Agreement and this Agreement has been duly and validly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement may be limited by the United States Bankruptcy Code and laws effecting creditors’ rights, generally.

 

 

 

7.2. Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under
this Agreement, the Exchange Notes, and each of the other Exchange Documents and to issue the Securities in accordance with the terms hereof, (ii) the execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby, including, without limitation, the issuance of the Securities, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors
or its stockholders, (iii) the Exchange Documents have been duly executed and delivered by the Company, (iv) the Exchange Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, and (v) the Company’s signatory has full corporate or other requisite authority to execute the Exchange Documents and to bind the Company. The Company’s Board of Directors has duly adopted a resolution authorizing this
Agreement and the other Exchange Documents and ratifying their terms, as indicated by the Secretary’s Certificate.

7.3. Issuance of Securities. The issuance of the Securities is duly authorized and the Securities are and will be, upon issuance, free and clear of all taxes, liens, claims, pledges,
mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description other than liens in favor of Holder, and when issued will be validly issued, fully paid and non-assessable.

7.4. No Conflicts. The execution and delivery by the Company of, and the performance by the Company of
its obligations under this Agreement in accordance with the terms of this Agreement will not contravene any provision of applicable law or the charter documents of the Company or any agreement or other instrument binding upon the Company, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement in accordance with the terms of this Agreement.

7.5. SEC Documents: Financial Statements. None of the Company’s filings (“SEC
Documents”) filed with the United States Securities and Exchange Commission (the “SEC”) contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Since October
27, 2015, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

7.6. Brokers. The Company has taken no action which would give rise to any claim by any person for a brokerage commission, placement agent or finder’s fees or similar payments
by Holder relating to this Agreement or the transactions contemplated hereby. The Company shall indemnify and hold harmless each of Holder, its employees, officers, directors, stockholders, managers, agents, attorneys, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed or existing fees.

7.7. Authorization and Issuance. The Original Debenture and each Purchased Debenture was (or, upon issuance, will have been) authorized by all necessary company action and validly
issued and executed, and the Company’s signatory had (or will have) full corporate or other requisite authority to execute such agreements and to bind the Company.

7.8. Holding Period. After due inquiry, the Company represents and warrants that at all times, the Company has complied in all material respects with all applicable
securities and other applicable laws in relation with the issuance, holding and transfers of the Original Debenture and each Purchased Debenture. To the Company’s knowledge, no violation of securities and other applicable laws occurred in connection with the acquisition, issuance, or holding of the Original Debenture or any Purchased Debenture.

7.9. No Modifications. No written document, agreement, instrument, contract, amendment or modification to the Original
Debenture exists that supplements, modifies, or amends the Initial Debenture or any Subsequent Debenture.

 

 

 

7.10. Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or
body pending against or affecting the Company, the Common Stock of the Company, $0.0001 par value per share (“Common Stock”), or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would have a material adverse effect on the Company or its operations.

7.11. No Additional Consideration. The Company has not received any cash or property consideration in any form whatsoever for entering into this Agreement,
other than the surrender of the Purchased Debentures.

7.12. Recitals. All of the information, facts and representations set forth in the Recitals section of this Agreement are in all respects true and accurate as of the date hereof and
are incorporated as representations and warranties of the Company as if set forth in this Section 7.

7.13. Acknowledgement of Obligations. The Company hereby acknowledges, confirms and agrees that the obligations of the Company to Holder under the Exchange Notes are unconditionally
owed by the Company to Holder without offset, defense or counterclaim of any kind, nature or description whatsoever.

8. Company Covenants. Until all of the Company’s obligations under all of the Exchange Documents are paid and performed in full, or within the timeframes otherwise specifically
set forth below, the Company shall comply with the following covenants: (i) so long as Holder beneficially owns any of the Securities and for at least twenty (20) Trading Days thereafter, the Company shall timely file on the applicable deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act, and shall take all reasonable action under its control to ensure that adequate current public information with respect to the Company, as required in accordance with
Rule 144 of the Securities Act, is publicly available, and shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination; (ii) the Common Stock shall be listed or quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, (d) OTCQB, or (e) OTC Pink Current Information; (iii) when issued, the Conversion Shares shall be duly authorized, validly issued, fully paid for and non-assessable,
free and clear of all liens, claims, charges and encumbrances; (iv) trading in the Company’s Common Stock shall not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on the Company’s principal trading market; (v) the Company shall not at any given time have any Variable Security Holders (as defined below), excluding Holder and any existing rights granted prior to the date hereof, without Holder’s prior written consent, which consent may be granted or withheld in Holder’s
sole and absolute discretion; (vi) at each Closing and on the first day of each calendar quarter for so long as any Exchange Note remains outstanding or on any other date during which any Exchange Note is outstanding, as may be requested by Holder, the Chief Executive Officer of the Company shall provide to Holder an Officer’s Certificate certifying in his capacity as Chief Executive Officer of the Company the number of Variable Security Holders of the Company as of the date the applicable Officer’s
Certificate is executed; (vii) upon the purchase by Holder of each Subsequent Debenture, the Company will immediately exchange such Subsequent Debenture for a Subsequent Exchange Note that includes an Exchange Fee in the original outstanding balance in accordance with Section 1.3 above; and (viii) if at any time the Common Stock trades below $0.0005, the Company shall, as soon as practicable but in no event longer than sixty (60) days thereafter, reduce the par value of its Common Stock to $0.00001 or below.
For purposes hereof, the term “Variable Security Holder” means any holder of any the Company securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Common Stock, or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred
stock), with a conversion price that varies with the market price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition (each a “Variable Security Issuance”). For avoidance of doubt, the issuance of shares of Common Stock under, pursuant to, in exchange for or in connection with any contract or instrument, whether convertible or not, is deemed a Variable Security
Issuance for purposes hereof if the number of shares of Common Stock to be issued is based upon or related in any way to the market price of the Common Stock, including, but not limited to, Common Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange.

 

 

 

9. Releases and Waivers.

9.1. Upon the full repayment of the Initial Exchange Note, Holder releases and forever discharges the Company of and from any and all manner of actions, suits, debts, sums of money, contracts, agreements, claims and demands at
law or in equity, that Holder had, or may have arising from the Initial Debenture.

9.2. Upon the full repayment of each Subsequent Exchange Note, Holder releases and forever discharges the Company of and from any and all manner of actions, suits, debts, sums of money, contracts, agreements, claims and demands
at law or in equity, that Holder had, or may have arising from the applicable Subsequent Debenture.

9.3. The Company hereby affirms that the obligations under the Exchange Notes and as set forth herein are valid and binding obligations of the Company, and hereby waives, to the fullest extent allowable under law, any and all defenses
that may be available to a debtor under applicable state and federal law including, without limiting the foregoing, any and all defenses available to a debtor or maker under the provisions of the Uniform Commercial Code pertaining to negotiable instruments.

9.4. Upon execution of this Agreement, the Company releases and forever discharges Holder of and from any and all manner of actions, suits, debts, sums of money, contracts, agreements, claims and demands at law or in equity, that
the Company had, or may have arising from the Purchased Debentures.

10. Reservation of Shares. At all times during which any Exchange Note is convertible, the Company will reserve from its authorized and unissued Common Stock to provide for all issuances
of Common Stock under the Exchange Notes at least three (3) times the number of shares of Common Stock obtained by dividing the aggregate Outstanding Balance of all potential Exchange Notes by the Conversion Price (as defined in the Exchange Notes) (the “Share Reserve”), but in any event not less than 215,000,000 shares of Common Stock shall be reserved at all times for such purpose (the “Transfer Agent Reserve”).
The Company further agrees that it will cause the Transfer Agent to immediately add shares of Common Stock to the Transfer Agent Reserve in increments of 20,000,000 shares as and when requested by Holder in writing from time to time, provided that such incremental increases do not cause the Transfer Agent Reserve to exceed the Share Reserve. In furtherance thereof, from and after the date hereof and until such time that all of the Exchange Notes have been paid in full, the Company shall require the Transfer Agent
to reserve for the purpose of issuance of Conversion Shares under the Exchange Notes, a number of shares of Common Stock equal to the Transfer Agent Reserve. The Company shall further require the Transfer Agent to hold such shares of Common Stock exclusively for the benefit of Holder and to issue such shares to Holder promptly upon Holder’s delivery of a conversion notice under the Exchange Note. Finally, the Company shall require the Transfer Agent to issue shares of Common Stock pursuant to the Exchange
Note to Holder out of its authorized and unissued shares, and not the Transfer Agent Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Transfer Agent Reserve. The Transfer Agent shall only issue shares out of the Transfer Agent Reserve to the extent there are no other authorized shares available for issuance and then only with Holder’s written consent.

11. Miscellaneous. The provisions set forth in this Section 11 shall apply to this Agreement, as well as all other Exchange Documents as if these terms were fully set forth therein.

 

 

 

11.1. To the extent any capitalized term used in any Exchange Document is defined in any other Exchange Document (as noted therein), such capitalized term shall remain applicable in the Exchange Document in which it is so used
even if the other Exchange Document (wherein such term is defined) has been released, satisfied, or is otherwise cancelled.

11.2. Arbitration of Claims. The parties shall submit all Claims (as defined in Exhibit G) arising under this Agreement, any other
Exchange Document, or any other agreement between the parties and their affiliates to binding arbitration pursuant to the arbitration provisions set forth in Exhibit G attached hereto (the “Arbitration Provisions”). The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. By executing
this Agreement, the Company represents, warrants and covenants that the Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that the Company will not take a position contrary to the foregoing representations.
The Company acknowledges and agrees that Holder may rely upon the foregoing representations and covenants of the Company regarding the Arbitration Provisions.

11.3. Governing Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah without regard to the principles of conflict of laws.
Each party consents to and expressly agrees that the exclusive venue for arbitration of any dispute arising out of or relating to this Agreement or the relationship of the parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the parties’ obligations to resolve disputes hereunder pursuant to the Arbitration Provisions, each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in Salt Lake County, Utah in any proceeding arising out of or relating
to this Agreement and agrees that all Claims (as defined in the Arbitration Provisions) in respect of the proceeding may only be heard and determined in any such court and hereby expressly submits to the exclusive personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth in the Purchase Agreement, such service to become effective ten (10) days after such mailing.

11.4. Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or arithmetic calculation under the Exchange Documents, including
without limitation, calculating the Outstanding Balance, Conversion Price (as defined in the Exchange Notes), Conversion Shares, Conversion Factor (as defined in the Exchange Notes), or VWAP (as defined in the Exchange Notes) (each, a “Calculation”), the Company or Holder (as the case may be) shall submit any disputed Calculation via email or facsimile with confirmation of receipt (i) within two (2) Trading Days after receipt of the applicable notice giving rise
to such dispute to the Company or Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after Holder learned of the circumstances giving rise to such dispute. If Holder and the Company are unable to agree upon such Calculation within two (2) Trading Days of such disputed Calculation being submitted to the Company or Holder (as the case may be), then Holder will promptly submit via email or facsimile the disputed Calculation to Unkar Systems Inc. (“Unkar
Systems”). The Company shall cause Unkar Systems to perform the Calculation and notify the Company and Holder of the results no later than ten (10) Trading Days from the time it receives such disputed Calculation. Unkar Systems’ determination of the disputed Calculation shall be binding upon all parties absent demonstrable and manifest error. Unkar Systems’ fee for performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation
is furthest from the correct Calculation as determined by Unkar Systems. In the event the Company is the losing party, no extension of the Delivery Date (as defined in the Note) shall be granted and the Company shall incur all effects for failing to deliver the applicable shares in a timely manner as set forth in the Exchange Documents. Notwithstanding the foregoing, Holder may, in its sole discretion, designate an independent, reputable investment bank or accounting firm other than Unkar Systems to resolve any
such dispute and in such event, all references to “Unkar Systems” herein will be replaced with references to such independent, reputable investment bank or accounting firm so designated by Holder.

 

 

 

11.5. Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto.
Except as otherwise expressly provided herein, no person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement.

11.6. Pronouns. All pronouns and any variations thereof in this Agreement refer to the masculine, feminine or neuter, singular or plural, as the context may permit or require.

11.7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together
shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Agreement (or its signature page thereof) will be deemed to be an executed original thereof.

11.8. Document Imaging. Holder shall be entitled, in its sole discretion, to image or make copies of all or any selection of the agreements, instruments, documents, and items and
records governing, arising from or relating to any of the Company’s loans, including, without limitation, this Agreement and the other Exchange Documents, and Holder may destroy or archive the paper originals. The parties hereto (a) waive any right to insist or require that Holder produce paper originals, (b) agree that such images shall be accorded the same force and effect as the paper originals, (c) agree that Holder is entitled to use such images in lieu of destroyed or archived originals for any
purpose, including as admissible evidence in any demand, presentment or other proceedings, and (d) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged copy of this Agreement or any other Exchange Document shall be deemed to be of the same force and effect as the original manually executed document.

11.9. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

11.10. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

11.11. Entire Agreement. This Agreement, together with the Exchange Notes, and the other Exchange Documents, constitutes and contains the entire agreement between the parties hereto,
and supersedes all prior oral or written agreements and understandings between Holder, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor Holder makes any representation, warranty, covenant or undertaking with respect
to such matters.

 

 

 

11.12. No Reliance. The Company acknowledges and agrees that neither Holder nor any of its officers, directors, members, managers, partners, representatives or agents has made any
representations or warranties to the Company or any of its officers, directors, stockholders, agents, representatives, or employees except as expressly set forth in the Exchange Documents and, in making its decision to enter into the transactions contemplated by the Exchange Documents, the Company is not relying on any representation, warranty, covenant or promise of Holder or its officers, directors, members, managers, agents or representatives other than as set forth in the Exchange Documents.

11.13. Amendment. Any amendment, supplement or modification of or to any provision of this Agreement, shall be effective only if it is made or given by an instrument in writing (excluding
any email message) and signed by the Company and Holder.

11.14. No Waiver. No forbearance, failure or delay on the part of a party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver of any provision of this Agreement shall be effective (a) only if it is made or given in writing (including an email message) and (b) only in the specific instance and for the specific purpose for which made or given.

11.15. Assignment. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise,
in whole or in part, by the Company without the prior written consent of Holder, which consent may be withheld at the sole discretion of Holder; provided, however, that in the case of a merger, sale of substantially all of the Company’s assets or other corporate reorganization, Holder shall not unreasonably withhold, condition or delay such consent. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder
hereunder may be assigned by Holder to a third party, including its financing sources, in whole or in part.

11.16. Advice of Counsel. In connection with the preparation of this Agreement and all other Exchange Documents, each of the Company, its stockholders, officers, agents, and representatives
acknowledges and agrees that the attorney that prepared this Agreement and all of the other Exchange Documents acted as legal counsel to Holder only. Each of the Company, its stockholders, officers, agents, and representatives (a) hereby acknowledges that he/she/it has been, and hereby is, advised to seek legal counsel and to review this Agreement and all of the other Exchange Documents with legal counsel of his/her/its choice, and (b) either has sought such legal counsel or hereby waives the right to do so.

11.17. No Strict Construction. The language used in this Agreement is the language chosen mutually by the parties hereto and no doctrine of construction shall be applied for or against
any party.

11.18. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Exchange Documents, the parties
agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims
or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

11.19. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER EXCHANGE DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

 

 

11.20. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

11.21. Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of:
(i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each
of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto):

If to the Company:

 

GrowLife, Inc.

Attn: Marco Hegyi

5400 Carillon Point

Kirkland, Washington 98033

 

If to Holder:

 

Chicago Venture Partners, L.P.

Attn: John Fife

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

With a copy to (which copy shall not constitute notice):

 

Hansen Black Anderson Ashcraft PLLC

Attn: Jonathan Hansen

3051 West Maple Loop Drive, Suite 325

Lehi, Utah 84043

 

11.22. Certain Transactions. During the period beginning on the Initial Closing Date and ending on the date that Holder no longer owns any of the Securities, Holder will not directly
or through an affiliate engage in any open market Short Sales (as defined below) of the Common Stock; provided; however, that unless and until Company has affirmatively demonstrated by the use of specific evidence that Holder is engaging in open market Short Sales, Holder shall be assumed to be in compliance with the provisions of this Section and Company shall remain fully obligated to fulfill all of its obligations under the Exchange Documents; and provided, further, that (i) Company shall under no circumstances
be entitled to request or demand that Holder either (A) provide trading or other records of Holder or of any party or (B) affirmatively demonstrate that Holder or any other party has not engaged in any such Short Sales in breach of these provisions as a condition to Company’s fulfillment of its obligations under any of the Exchange Documents, (ii) Company shall not assert Holder’s or any other party’s failure to demonstrate such absence of such Short Sales or provide any trading or other records
of Holder or any other party as all or part of a defense to any breach of Company’s obligations under any of the Exchange Documents, and (iii) Company shall have no setoff right with respect to any such Short Sales. As used herein, “Short Sale” has the meaning provided in Rule 3b-3 under the Exchange Act.

 

 

 

11.23. Survival of Representations and Warranties. All of the representations and warranties made herein shall survive the execution and delivery of this Agreement for the maximum
time allowable by applicable law.

11.24. Transaction Fees. Each party shall be responsible for its own attorneys’ fees and other costs and expenses associated with documenting and closing the transaction contemplated
by this Agreement.

11.25. Specific Performance. The Company and Holder acknowledge and agree that irreparable damage would occur in the
event that any provision of this Agreement or any of the other Exchange Documents were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions, without (except as specified in the Arbitration Provisions) the necessity to post a bond, to prevent or cure breaches of the provisions of this Agreement or such other Exchange Document and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

11.26. Time is of the Essence. Time is expressly made of the essence of each and every provision of this Agreement and the Exchange Documents.

11.27. Voluntary Agreement. The Company has carefully read this Agreement and each of the other Exchange Documents and has asked any questions needed
for the Company to understand the terms, consequences and binding effect of this Agreement and each of the other Exchange Documents and fully understand them. The Company has had the opportunity to seek the advice of an attorney of the Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Exchange Documents voluntarily and without any duress or undue influence by Holder or anyone else.

[Remainder of the page intentionally left blank; signature page to follow]

 

 

 

IN WITNESS WHEREOF, each of the undersigned represents that the foregoing statements made by it above are true and correct and that it has caused this Exchange Agreement to be duly executed on its behalf (if an entity, by one of its officers thereunto duly authorized) as of the date first above written.

HOLDER:

 

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C., its General Partner

 

     By: CVM, Inc., its Manager

 

    By:/s/ John M. Fife

   John M. Fife, President

 

 

COMPANY:

 

GrowLife, Inc.

 

 

By: /s/ Marco Hegyi

Name: Marco Hegyi

Title: CEO

 

 

ATTACHMENTS:

 

Exhibit A Initial Exchange Note

Exhibit B Form of Subsequent Exchange Note

Exhibit C Transfer Agent Letter

Exhibit D Secretary’s Certificate

Exhibit E Share Issuance Resolution

Exhibit F Officer’s Certificate

Exhibit G Arbitration Provisions

 

 

EXHIBIT G

 

ARBITRATION PROVISIONS

 

1.       Dispute Resolution. For purposes of this Exhibit G, the term “Claims” means any disputes, claims, demands, causes of action, requests for injunctive
relief, requests for specific performance, liabilities, damages, losses, or controversies whatsoever arising from, related to, or connected with the transactions contemplated in the Exchange Documents, and any communications between the parties related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory claims,
tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration Provisions (defined below)), any of the other Exchange Documents, if applicable. The term “Claims” specifically excludes a dispute over Calculations. The parties to the Agreement (the “parties”) hereby agree that the arbitration provisions set forth in this Exhibit G (“Arbitration
Provisions”) are binding on each of them. As a result, any attempt to rescind the Agreement (or these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions), any other Exchange Document, invalid or unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration Provisions shall also survive any termination or expiration of the Agreement. Any capitalized term not defined in these Arbitration Provisions shall have the meaning set forth in the Agreement.

2.       Arbitration. Except as otherwise provided herein, all Claims must be submitted to arbitration (“Arbitration”) to be conducted exclusively in Salt Lake County or Utah County, Utah and pursuant
to the terms set forth in these Arbitration Provisions. Subject to the arbitration appeal right provided for in Paragraph 5 below (the “Appeal Right”), the parties agree that the award of the arbitrator rendered pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a) final and binding upon the parties, (b) the sole and exclusive remedy between them regarding any Claims, counterclaims, issues, or
accountings presented or pleaded to the arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Arbitration Award shall include default interest (as defined
or otherwise provided for in the applicable Note (“Default Interest”)) (with respect to monetary awards) at the rate specified in the applicable Note for Default Interest both before and after the Arbitration Award. Judgment upon the Arbitration Award will be entered and enforced by any state or federal court sitting in Salt Lake County, Utah.

3.       The Arbitration Act. The parties hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded from
time to time, the “Arbitration Act”). Notwithstanding the foregoing, pursuant to, and to the maximum extent permitted by, Section 105 of the Arbitration Act, in the event of conflict or variation between the terms of these Arbitration Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions shall control and the parties hereby waive or otherwise agree to vary the effect of all requirements of the Arbitration Act that may
conflict with or vary from these Arbitration Provisions.

4.       Arbitration Proceedings. Arbitration between the parties will be subject to the following:

4.1         Initiation of Arbitration. Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by giving written notice to the other party (“Arbitration Notice”)
in the same manner that notice is permitted under Section 11.21 of the Agreement; provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration will be deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 11.21 of the Agreement (the “Service Date”). After the Service Date, information may be delivered, and notices may be given, by
email or fax pursuant to Section 11.21 of the Agreement or any other method permitted thereunder. The Arbitration Notice must describe the nature of the controversy, the remedies sought, and the election to commence Arbitration proceedings. All Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules of Civil Procedure.

 

 

 

4.2         Selection and Payment of Arbitrator.

(a) Within ten (10) calendar days after the Service Date, Holder shall select and submit to the Company the names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such three (3) designated persons hereunder are referred to herein
as the “Proposed Arbitrators”). For the avoidance of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five (5) calendar days after Holder has submitted to the Company the names of the Proposed Arbitrators, the Company must select, by written notice to Holder, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If the Company fails to select
one of the Proposed Arbitrators in writing within such 5-day period, then Holder may select the arbitrator from the Proposed Arbitrators by providing written notice of such selection to the Company.

(b) If Holder fails to submit to the Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant to subparagraph (a) above, then the Company may at any time prior to Holder so designating the Proposed Arbitrators, identify the names of three (3) arbitrators that are designated as “neutrals”
or qualified arbitrators by Utah ADR Service by written notice to Holder. Holder may then, within five (5) calendar days after the Company has submitted notice of its Proposed Arbitrators to Holder, select, by written notice to the Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Holder fails to select in writing and within such 5-day period one (1) of the three (3) Proposed Arbitrators selected by the Company, then the Company may select
the arbitrator from its three (3) previously selected Proposed Arbitrators by providing written notice of such selection to Holder.

(c) If a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party that selected such Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar days of the date the chosen Proposed Arbitrator declines or notifies the
parties he or she is unable to serve as arbitrator. If all three (3) Proposed Arbitrators decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process shall begin again in accordance with this Paragraph 4.2.

(d) The date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered to both parties to serve as the arbitrator hereunder is referred to herein as the “Arbitration Commencement Date”. If an arbitrator resigns or is unable
to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with this Paragraph 4.2 to continue the Arbitration. If Utah ADR Services ceases to exist or to provide a list of neutrals, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.

(e) Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below, if one party refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject to the accrual of Default Interest thereupon), with such amount
being added to or subtracted from, as applicable, the Arbitration Award.

4.3         Applicability of Certain Utah Rules. The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules of Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil
Procedure shall apply, without limitation, to the filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing, it is the parties’ intent that the incorporation of such rules will in no event supersede these Arbitration Provisions. In the event of any conflict between the Utah Rules of Civil Procedure or the Utah
Rules of Evidence and these Arbitration Provisions, these Arbitration Provisions shall control.

 

 

 

4.4         Answer and Default. An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer
is not delivered by the required deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a default award against such party if such party does not file an answer within five (5) calendar days of receipt of such notice. If an answer is not filed within the five (5) day extension period, the arbitrator must render a default award, consistent with the relief requested in the Arbitration Notice, against a party that fails to submit an answer within such
time period.

4.5         Related Litigation. The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent legal proceedings with any state or federal court sitting in Salt Lake County, Utah (“Litigation
Proceedings”), subject to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b) so long as the other party files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings will be stayed pending an Arbitration Award (or Appeal Panel Award (defined
below), as applicable) hereunder, (c) if the other party fails to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings, then the party initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be entered in the Litigation Proceedings, and (d) any legal or procedural issue arising under the Arbitration Act that requires a decision of a court of competent jurisdiction may be determined in the Litigation Proceedings. Any award of the
arbitrator (or of the Appeal Panel (defined below)) may be entered in such Litigation Proceedings pursuant to the Arbitration Act.

4.6         Discovery. Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows:

(a) Written discovery will only be allowed if the likely benefits of the proposed written discovery outweigh the burden or expense thereof, and the written discovery sought is likely to reveal information that will satisfy a specific element of a claim or defense already pleaded in the Arbitration. The party seeking written discovery
shall always have the burden of showing that all of the standards and limitations set forth in these Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings shall also be limited as follows:

(i)                 To facts directly connected with the transactions contemplated by the Agreement.

(ii)                 To facts and information that cannot be obtained from another source or in another manner that is more convenient, less burdensome or less expensive than in the manner requested.

(b) No party shall be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15) requests for admission (including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts), or (iv) more than three (3) depositions (excluding expert depositions)
for a maximum of seven (7) hours per deposition. The costs associated with depositions will be borne by the party taking the deposition. The party defending the deposition will submit a notice to the party taking the deposition of the estimated attorneys’ fees that such party expects to incur in connection with defending the deposition. If the party defending the deposition fails to submit an estimate of attorneys’ fees within five (5) calendar days of its receipt of a deposition notice, then such
party shall be deemed to have waived its right to the estimated attorneys’ fees. The party taking the deposition must pay the party defending the deposition the estimated attorneys’ fees prior to taking the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence. If the party taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the issue to the arbitrator for a decision. All depositions
will be taken in Utah.

(c) All discovery requests (including document production requests included in deposition notices) must be submitted in writing to the arbitrator and the other party. The party submitting the written discovery requests must include with such discovery requests a detailed explanation of how the proposed discovery requests satisfy
the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure. The receiving party will then be allowed, within five (5) calendar days of receiving the proposed discovery requests, to submit to the arbitrator an estimate of the attorneys’ fees and costs associated with responding to such written discovery requests and a written challenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or challenge(s) to one or more discovery
requests, consistent with subparagraph (c) above, the arbitrator will within three (3) calendar days make a finding as to the likely attorneys’ fees and costs associated with responding to the discovery requests and issue an order that (i) requires the requesting party to prepay the attorneys’ fees and costs associated with responding to the discovery requests, and (ii) requires the responding party to respond to the discovery requests as limited by the arbitrator within twenty-five (25) calendar
days of the arbitrator’s finding with respect to such discovery requests. If a party entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to discovery requests fails to do so within such 5-day period, the arbitrator will make a finding that (A) there are no attorneys’ fees or costs associated with responding to such discovery requests, and (B) the responding party must respond to such discovery requests (as may be limited by the arbitrator) within twenty-five (25) calendar
days of the arbitrator’s finding with respect to such discovery requests. Any party submitting any written discovery requests, including without limitation interrogatories, requests for production subpoenas to a party or a third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, before the responding party has any obligation to produce or respond to the same, unless such obligation is deemed waived as set forth above.

 

 

 

(d) In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set forth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards. If a discovery request does not satisfy any of the standards set forth
in these Arbitration Provisions or the Utah Rules of Civil Procedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery request in whole or in part.

(e) Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days of the Arbitration Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the following: (i) a complete statement of all opinions the expert will offer
at trial and the basis and reasons for them; (ii) the expert’s name and qualifications, including a list of all the expert’s publications within the preceding ten (10) years, and a list of any other cases in which the expert has testified at trial or in a deposition or prepared a report within the preceding ten (10) years; and (iii) the compensation to be paid for the expert’s report and testimony. The parties are entitled to depose any other party’s expert witness one (1) time for no
more than four (4) hours. An expert may not testify in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report.

4.6         Dispositive Motions. Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil Procedure (a “Dispositive Motion”). The party
submitting the Dispositive Motion may, but is not required to, deliver to the arbitrator and to the other party a memorandum in support (the “Memorandum in Support”) of the Dispositive Motion. Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to the arbitrator and to the other party a memorandum in opposition to the Memorandum in Support (the “Memorandum in Opposition”).
Within seven (7) calendar days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum in Support shall deliver to the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“Reply Memorandum”). If the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the other party fails to deliver the Reply Memorandum as required above, then the applicable
party shall lose its right to so deliver the same, and the Dispositive Motion shall proceed regardless.

4.7         Confidentiality. All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation information disclosed during the discovery process or any Appeal (defined below))
shall be considered confidential in nature. Each party agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration process (including without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure such information becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving party or its agents, (b) such information is required by a court order, subpoena
or similar legal duress to be disclosed if such receiving party has notified the other party thereof in writing and given it a reasonable opportunity to obtain a protective order from a court of competent jurisdiction prior to disclosure, or (c) such information is disclosed to the receiving party’s agents, representatives and legal counsel on a need to know basis who each agree in writing not to disclose such information to any third party. Pursuant to Section 118(5) of the Arbitration Act, the arbitrator
is hereby authorized and directed to issue a protective order to prevent the disclosure of privileged information and confidential information upon the written request of either party.

4.8         Authorization; Timing; Scheduling Order. Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and direct the arbitrator to take such actions and make such rulings as may be necessary to carry out
the parties’ intent for the Arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby agree that an Arbitration Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement Date. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10) calendar days after the Arbitration Commencement Date in order to establish a scheduling order with various binding deadlines for
discovery, expert testimony, and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 120-day period.

 

 

 

4.9         Relief. The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which the arbitrator deems proper under the circumstances, including, without limitation, specific performance
and injunctive relief, provided that the arbitrator may not award exemplary or punitive damages.

4.10                 Fees and Costs. As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being awarded the least amount of money by the arbitrator, which,
for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration, and (b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration.

5.       Arbitration Appeal.

5.1         Initiation of Appeal. Following the entry of the Arbitration Award, either party (the “Appellant”) shall have a period of thirty (30) calendar days in which to notify the other party
(the “Appellee”), in writing, that the Appellant elects to appeal (the “Appeal”) the Arbitration Award (such notice, an “Appeal Notice”) to a panel of arbitrators as provided in Paragraph 5.2 below. The date the Appellant delivers an Appeal Notice to the Appellee is referred to herein as the “Appeal Date”. The
Appeal Notice must be delivered to the Appellee in accordance with the provisions of Paragraph 4.1 above with respect to delivery of an Arbitration Notice. In addition, together with delivery of the Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to the Appellee together with delivery of the Appeal Notice) a bond in the amount of 110% of the sum the Appellant owes to the Appellee as a result of the Arbitration Award the Appellant is appealing. In the event an
Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as a matter of right and, except as specifically set forth herein, will not be further conditioned. In the event a party does not deliver an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline prescribed in this Paragraph 5.1, such party shall lose its right to appeal the
Arbitration Award. If no party delivers an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline described in this Paragraph 5.1, the Arbitration Award shall be final. The parties acknowledge and agree that any Appeal shall be deemed part of the parties’ agreement to arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.

5.2         Selection and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will
be heard by a three (3) person arbitration panel (the “Appeal Panel”).

(a)         Within ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such five
(5) designated persons hereunder are referred to herein as the “Proposed Appeal Arbitrators”). For the avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and shall not be the arbitrator who rendered the Arbitration Award being appealed (the “Original Arbitrator”). Within five (5) calendar days after the Appellee has submitted to the Appellant
the names of the Proposed Appeal Arbitrators, the Appellant must select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of the Appeal Panel. If the Appellant fails to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day period, then the Appellee may select such three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice of such selection to the Appellant.

(b)         If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days after the Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating the Proposed Appeal
Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee. The Appellee may then, within five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee, select, by written notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee fails to select in
writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members of the Appeal Panel, then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of five (5) arbitrators by providing written notice of such selection to the Appellee.

 

 

 

(c)         If a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed Appeal Arbitrator may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days of the date a chosen
Proposed Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator. If at least three (3) of the five (5) designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator selection process shall begin again in accordance with this Paragraph 5.2; provided, however, that any Proposed Appeal Arbitrators who have already agreed to serve shall remain on the Appeal Panel.

(d)         The date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including via email) delivered to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein as the “Appeal
Commencement Date”. No later than five (5) calendar days after the Appeal Commencement Date, the Appellee shall designate in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3) members of the Appeal Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be deemed an arbitrator for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal, the Appeal
Panel may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as announced or communicated by the lead arbitrator on the Appeal Panel. If an arbitrator on the Appeal Panel ceases or is unable to act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance with Paragraph 5.2 above to continue the Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide
a list of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then prevailing rules of the American Arbitration Association.

(d)         Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant.

5.3         Appeal Procedure. The Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel shall conduct a de novo review of all Claims described or otherwise set forth in the Arbitration Notice.
Subject to the foregoing and all other provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers appropriate for a fair and expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and may review all previous evidence and discovery, together with all briefs, pleadings and other documents filed with the Original Arbitrator (as well as any documents filed with the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding
the foregoing, in connection with the Appeal, the Appeal Panel shall not permit the parties to conduct any additional discovery or raise any new Claims to be arbitrated, shall not permit new witnesses or affidavits, and shall not base any of its findings or determinations on the Original Arbitrator’s findings or the Arbitration Award.

5.4         Timing.

 (a)         Within seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal Panel copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other documents
filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary), and (ii) may, but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s arguments concerning or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the Appellee
shall deliver to the Appeal Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within seven (7) calendar days of the Appellee’s delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver to the Appeal Panel and to the Appellee a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially comply with the requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration
Award, and the Arbitration Award shall be final. If the Appellee shall fail to deliver the Memorandum in Opposition as required above, or if the Appellant shall fail to deliver the Reply Memorandum as required above, then the Appellee or the Appellant, as the case may be, shall lose its right to so deliver the same, and the Appeal shall proceed regardless.

 

 

 

(b)         Subject to subparagraph (a) above, the parties hereby agree that the Appeal must be heard by the Appeal Panel within thirty (30) calendar days of the Appeal Commencement Date, and that the Appeal Panel must render its decision within thirty (30) calendar days after the Appeal
is heard (and in no event later than sixty (60) calendar days after the Appeal Commencement Date).

5.5         Appeal Panel Award. The Appeal Panel shall issue its decision (the “Appeal Panel Award”) through the lead arbitrator on the Appeal Panel. Notwithstanding any other provision contained
herein, the Appeal Panel Award shall (a) supersede in its entirety and make of no further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator shall remain in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the sole and exclusive remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration, and (d) be promptly payable in United States
dollars free of any tax, deduction or offset (with respect to monetary awards). Any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Appeal Panel Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Appeal Panel Award shall include Default Interest (with respect to monetary awards) at the rate specified in applicable Note for Default Interest both before and after the Arbitration
Award. Judgment upon the Appeal Panel Award will be entered and enforced by a state or federal court sitting in Salt Lake County, Utah.

5.6         Relief. The Appeal Panel shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems proper under the circumstances, including, without limitation, specific performance and injunctive relief,
provided that the Appeal Panel may not award exemplary or punitive damages.

5.7         Fees and Costs. As part of the Appeal Panel Award, the Appeal Panel is hereby directed to require the losing party (the party being awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined
without regard to any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration and the Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount of money by the Appeal Panel, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any part) the reasonable attorneys’ fees, arbitrator and Appeal Panel
costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration (including without limitation in connection with the Appeal).

6.           Miscellaneous.

6.1         Severability. If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall be modified to the minimum extent necessary to make such provision enforceable under applicable
law, and the remainder of the Arbitration Provisions shall remain unaffected and in full force and effect.

6.2         Governing Law. These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws principles therein.

6.3         Interpretation. The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation of, these Arbitration Provisions.

6.4         Waiver. No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by the party granting the waiver.

6.5         Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of these Arbitration Provisions.

 

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EXHIBIT A

THIS NOTE (AS DEFINED BELOW) IS ISSUED IN EXCHANGE FOR (WITHOUT ANY ADDITIONAL CONSIDERATION) THAT CERTAIN FIRST REPLACEMENT AMENDED, RESTATED AND CONSOLIDATED SENIOR SECURED CONVERTIBLE REDEEMABLE DEBENTURE A IN THE ORIGINAL PRINCIPAL AMOUNT OF $80,000.00 HAVING AN ORIGINAL ISSUE DATE OF OCTOBER 27, 2015. FOR PURPOSES OF RULE 144
(AS DEFINED BELOW), THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON OCTOBER 27, 2015.

CONVERTIBLE PROMISSORY NOTE

“Original Issue Date”: October 27, 2015  U.S. $128,000.00

 

FOR VALUE RECEIVED, GrowLife, Inc., a Delaware corporation (“Borrower”), promises to pay to Chicago Venture Partners, L.P., a Utah limited partnership, or its successors or assigns (“Lender”),
$128,000.00 and any interest, fees, charges, and late fees on or before the date that is six (6) months from the Exchange Date (as defined below) (the “Maturity Date”) in accordance with the terms set forth herein. This Convertible Promissory Note (this “Note”) is issued and made effective pursuant to that certain Exchange Agreement dated as of August 17, 2016 (the “Exchange
Date”), as the same may be amended from time to time (the “Exchange Agreement”), by and between Borrower and Lender, pursuant to which Lender exchanged the Initial Debenture (as defined in the Exchange Agreement) for this Note, pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended. Certain capitalized terms used herein are defined in Attachment 1 attached
hereto and incorporated herein by this reference.

As set forth in the Exchange Agreement, Borrower agreed to pay an Exchange Fee (as defined in the Exchange Agreement) in the amount of $48,000.00, all of which Exchange Fee is included in the initial principal balance of this Note and all of which amount is fully earned and payable as of the date hereof.

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 Exchange 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: (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% 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. 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.

 

 

 

Security. This Note is unsecured.

Conversion.

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 the product of 65% (the “Conversion Factor”)
multiplied by the average for the three (3) lowest daily VWAPs for the Common Stock (as defined below) in the twenty (20) Trading Days immediately preceding the applicable Conversion. Additionally, if at any time after the Exchange 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 Exchange 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 Exchange 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 Borrower is not DTC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 65%
to 60% 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.

Conversions. Lender has the right at any time after the Exchange 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, $0.0001 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. 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.

Defaults and Remedies.

Defaults. The following are events of default under this Note (each, an “Event of Default”): Exhibit H Borrower shall fail to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; or Exhibit I Borrower shall
fail to deliver any Conversion Shares in accordance with the terms hereof; or Exhibit J 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; or Exhibit K 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 Exhibit L Borrower shall make a general assignment for the benefit of creditors; or Exhibit M Borrower shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or Exhibit N an involuntary proceeding shall be commenced or filed against Borrower; or Exhibit O Borrower shall default or otherwise fail to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein or in any other Exchange Document (as defined in the Exchange
Agreement), other than those specifically set forth in this Section 4.1 and Section 8 of the Exchange Agreement; or Exhibit P any representation, warranty or other statement made or furnished by or on behalf of Borrower to Lender herein, in any Exchange 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 Exhibit Q the occurrence of a Fundamental Transaction without Lender’s prior written
consent; or Exhibit R Borrower shall fail to maintain the Share Reserve as required under the Exchange Agreement; or Exhibit S Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Lender; or Exhibit T 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 $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) calendar days unless otherwise consented to by Lender; or Exhibit U Borrower shall fail to be DTC Eligible; or Exhibit V Borrower shall fail to observe or perform any covenant set forth in Section 8 of the Exchange Agreement.

 

 

 

 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. 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”). 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.

Cross Default. A breach or default by Borrower of any covenant or other term or condition contained in any Other Agreements 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.

Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, 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.

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.

Rights Upon Issuance of Securities.

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, issue or grant any Common Stock, option to purchase Common Stock, right to reprice, 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 (collectively, the “Equity Securities”), at an effective price per share less than the then effective Conversion Price (such issuance 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 Equity Securities are issued. Borrower shall notify Lender, in writing, no later than the Trading Day following the issuance of any 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.

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 Exchange 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 Exchange 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 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.

 

 

 

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 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.

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,
provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), 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. Moreover, and notwithstanding anything to the contrary herein or in any other Exchange
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 8. 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.

Conversion Delays. If Borrower fails to deliver Conversion Shares in accordance with the timeframe stated in Section 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 (any returned amount will tack back to the Original Issue 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).

 

 

 

Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Exchange Documents, if at any time Lender shall or would be issued shares of Common Stock under any of the Exchange 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.

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.

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.

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 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 jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Exchange Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

 

 

Resolution of Disputes.

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

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

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.

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

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.

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.

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 Exchange Agreement titled “Notices.”

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 Original Issue Date for purposes of determining the holding period under Rule 144).

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 PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY
AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

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.

 

 

 

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.

Par Value Adjustments. If at any time Lender delivers a Conversion Notice to Borrower and as of such date the Conversion Price would be less than the Par Value, then, as liquidated damages, Company must pay to Lender the Par Value Adjustment Amount in cash within one (1) Trading Day of delivery of the
applicable Conversion Notice (a “Par Value Adjustment”). If Borrower does not deliver the Par Value Adjustment Amount as required, then such amount shall automatically be added to the Outstanding Balance. The number of Conversion Shares deliverable pursuant to any relevant Conversion Notice following a Par Value Adjustment shall be equal to (a) the Conversion Amount, divided by (b) the Par Value. In the event of a Par Value Adjustment, Lender will use a Conversion
Notice in substantially the form attached hereto as Exhibit B.

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

 

 

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

BORROWER:

GrowLife, Inc.

 

By: /s/ Marco Hegyi

Name: Marco Hegyi

Title: CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C.,

its General Partner

 

By: CVM, Inc., its Manager

 

 

By: /s/ John M. Fife

   John M. Fife, President

 

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

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

“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).

“Deemed Issuance” means an issuance of Common Stock that shall be deemed to have occurred on the latest possible permitted date pursuant to the terms hereof in the event Borrower fails to deliver Conversion Shares as
and when required pursuant to Section 8.

“Default Effect” means multiplying the 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.

“DTC” means the Depository Trust Company.

“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.

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

“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

“DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system,
(b) Borrower has been approved (without revocation) by the DTC’s underwriting department, (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program, (d) the Conversion Shares are otherwise eligible for delivery via DWAC; (e) Borrower has previously delivered all Conversion Shares to Lender via DWAC; and (f) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

“Excluded Securities” means any shares of Common Stock, options, or convertible securities issued or issuable in connection with any Approved Stock Plan; provided
that the option term, exercise price or similar provisions of any issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Exchange Date.

“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.

 

 

 

“Major Default” means any Event of Default occurring under Sections 4.1(a), 4.1(k), or 4.1(o) of this Note.

“Mandatory Default Amount” means the greater of (a) the Outstanding Balance 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.

“Market Capitalization” means 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.

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

“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.

“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.

“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 Exchange
Fee, 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.

Par Value” means the par value of the Common Stock on any relevant date of determination. The Par Value as of the Exchange Date is $0.0001.

“Par Value Adjustment Amount” means an amount calculated as follows: (a) the number of Conversion Shares deliverable under a particular Conversion Notice (prior to any Par Value Adjustment) multiplied by the Par Value,
less (b) the Conversion Amount (prior to any Par Value Adjustment), plus (c) $500.00. For illustration purposes only, if for a given Conversion, the Conversion Amount was $20,000.00, the Conversion Price was $0.0008 and the Par Value was $0.001 then the Par Value Adjustment Amount would be $5,500.00 (25,000,000 Conversion Shares ($20,000.00/$0.0008) multiplied by the Par Value of $0.001 ($25,000.00) minus the Conversion Amount of $20,000.00 plus $500.00 equals $5,500.00).

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

“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.

 

 

EXHIBIT A

Chicago Venture Partners, L.P.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

GrowLife, Inc.                                                                                                                                           Date:
__________________

Attn: Marco Hegyi, CEO

5400 Carillon Point

Kirkland, Washington 98033

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to GrowLife, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 17, 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: ____________*

 

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

 

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

 

Name:        _____________________________________

Address:    _____________________________________

_____________________________________

 

To the extent the Lender Conversion Shares are not DTC Eligible, please deliver, via reputable overnight courier, a certificate representing the non-DTC Eligible Lender Conversion Shares to the party at the address set forth above.

 

 

[Remainder of page intentionally left blank]

 

 

 

Sincerely,

 

Lender:

 

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C.,

its General Partner

 

By: CVM, Inc., its Manager

 

 

By:                                                     

      John M. Fife, President

 

 

EXHIBIT B

Chicago Venture Partners, L.P.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

GrowLife, Inc.                                                                                                                                           Date:
__________________

Attn: Marco Hegyi, CEO

5400 Carillon Point

Kirkland, Washington 98033

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to GrowLife, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 17, 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. Par Value Adjustment Amount: _______________

E. Conversion Price: _______________ (Par Value)

F. Conversion Shares: _______________ (C divided by E)

F. Remaining Outstanding Balance of Note: ____________*

 

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

 

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

 

Name:        _____________________________________

Address:     _____________________________________

_____________________________________

 

To the extent the Lender Conversion Shares are not DTC Eligible, please deliver, via reputable overnight courier, a certificate representing the non-DTC Eligible Lender Conversion Shares to the party at the address set forth above.

 

The Par Value Adjustment Amount must be paid in cash within one (1) Trading Day of your receipt of this Conversion Notice.

 

 

[Remainder of page intentionally left blank]

 

 

Sincerely,

 

Lender:

 

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C.,

its General Partner

 

By: CVM, Inc., its Manager

 

 

By:                                                     

      John M. Fife, President

 

 

 

 

 

 

EXHIBIT B

THIS NOTE (AS DEFINED BELOW) IS ISSUED IN EXCHANGE FOR (WITHOUT ANY ADDITIONAL CONSIDERATION) THAT CERTAIN FIRST REPLACEMENT AMENDED, RESTATED AND CONSOLIDATED SENIOR SECURED CONVERTIBLE REDEEMABLE DEBENTURE A IN THE ORIGINAL PRINCIPAL AMOUNT OF $________ HAVING AN ORIGINAL ISSUE DATE OF OCTOBER 27, 2015. FOR PURPOSES OF RULE 144
(AS DEFINED BELOW), THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON OCTOBER 27, 2015.

FORM OF CONVERTIBLE PROMISSORY NOTE

“Original Issue Date”: October 27, 2015  U.S. $_________

 

FOR VALUE RECEIVED, GrowLife, Inc., a Delaware corporation (“Borrower”), promises to pay to Chicago Venture Partners, L.P., a Utah limited partnership, or its successors or assigns (“Lender”),
$________ and any interest, fees, charges, and late fees on or before the date that is six (6) months from the Exchange Date (as defined below) (the “Maturity Date”) in accordance with the terms set forth herein. This Convertible Promissory Note (this “Note”) is issued and made effective pursuant to that certain Exchange Agreement dated as of August 17, 2016 (the “Exchange
Date”), as the same may be amended from time to time (the “Exchange Agreement”), by and between Borrower and Lender, pursuant to which Lender exchanged the First Replacement Amended, Restated and Consolidated Senior Secured Convertible Redeemable Debenture B dated and made effective as of ________ but with an original issuance date of October 27, 2015 for this Note, pursuant to Section
3(a)(9) of the Securities Act of 1933, as amended. Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

As set forth in the Exchange Agreement, Borrower agreed to pay an Exchange Fee (as defined in the Exchange Agreement) in the amount of $_________, all of which Exchange Fee is included in the initial principal balance of this Note and all of which amount is fully earned and payable as of the date hereof.

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 Exchange 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: (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% 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. 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.

 

 

 

Security. This Note is unsecured.

Conversion.

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 the product of 65% (the “Conversion Factor”)
multiplied by the average for the three (3) lowest daily VWAPs for the Common Stock (as defined below) in the twenty (20) Trading Days immediately preceding the applicable Conversion. Additionally, if at any time after the Exchange 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 Exchange 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 Exchange 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 Borrower is not DTC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 65%
to 60% 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.

Conversions. Lender has the right at any time after the Exchange 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, $0.0001 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. 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.

Defaults and Remedies.

Defaults. The following are events of default under this Note (each, an “Event of Default”): Exhibit W Borrower shall fail to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; or Exhibit X Borrower shall
fail to deliver any Conversion Shares in accordance with the terms hereof; or Exhibit Y 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; or Exhibit Z 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 Exhibit AA Borrower shall make a general assignment for the benefit of creditors; or Exhibit BB Borrower shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or Exhibit CC an involuntary proceeding shall be commenced or filed against Borrower; or Exhibit DD Borrower shall default or otherwise fail to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein or in any other Exchange Document (as defined in the Exchange
Agreement), other than those specifically set forth in this Section 4.1 and Section 8 of the Exchange Agreement; or Exhibit EE any representation, warranty or other statement made or furnished by or on behalf of Borrower to Lender herein, in any Exchange 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 Exhibit FF the occurrence of a Fundamental Transaction without Lender’s prior written
consent; or Exhibit GG Borrower shall fail to maintain the Share Reserve as required under the Exchange Agreement; or Exhibit HH Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Lender; or Exhibit II 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 $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) calendar days unless otherwise consented to by Lender; or Exhibit JJ Borrower shall fail to be DTC Eligible; or Exhibit KK Borrower shall fail to observe or perform any covenant set forth in Section 8 of the Exchange Agreement.

 

 

 

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. 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”).
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.

 

 

 

Cross Default. A breach or default by Borrower of any covenant or other term or condition contained in any Other Agreements 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.

Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, 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.

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.

Rights Upon Issuance of Securities.

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, issue or grant any Common Stock, option to purchase Common Stock, right to reprice, 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 (collectively, the “Equity Securities”), at an effective price per share less than the then effective Conversion Price (such issuance 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 Equity Securities are issued. Borrower shall notify Lender, in writing, no later than the Trading Day following the issuance of any 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.

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 Exchange 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 Exchange 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 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.

 

 

 

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 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.

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,
provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), 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. Moreover, and notwithstanding anything to the contrary herein or in any other Exchange
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 8. 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.

Conversion Delays. If Borrower fails to deliver Conversion Shares in accordance with the timeframe stated in Section 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 (any returned amount will tack back to the Original Issue 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).

 

 

 

Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Exchange Documents, if at any time Lender shall or would be issued shares of Common Stock under any of the Exchange 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.

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.

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.

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 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 jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Exchange Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

 

 

Resolution of Disputes.

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

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

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.

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

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.

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.

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 Exchange Agreement titled “Notices.”

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 Original Issue Date for purposes of determining the holding period under Rule 144).

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 PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY
AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

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.

 

 

 

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.

Par Value Adjustments. If at any time Lender delivers a Conversion Notice to Borrower and as of such date the Conversion Price would be less than the Par Value, then, as liquidated damages, Company must pay to Lender the Par Value Adjustment Amount in cash within one (1) Trading Day of delivery of the
applicable Conversion Notice (a “Par Value Adjustment”). If Borrower does not deliver the Par Value Adjustment Amount as required, then such amount shall automatically be added to the Outstanding Balance. The number of Conversion Shares deliverable pursuant to any relevant Conversion Notice following a Par Value Adjustment shall be equal to (a) the Conversion Amount, divided by (b) the Par Value. In the event of a Par Value Adjustment, Lender will use a Conversion
Notice in substantially the form attached hereto as Exhibit B.

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

 

 

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

BORROWER:

GrowLife, Inc.

 

By:                                                      

Name:                                                                

Title:                                                                

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C.,

its General Partner

 

By: CVM, Inc., its Manager

 

 

By:                                                     

      John M. Fife, President

 

 

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

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

“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).

“Deemed Issuance” means an issuance of Common Stock that shall be deemed to have occurred on the latest possible permitted date pursuant to the terms hereof in the event Borrower fails to deliver Conversion Shares as
and when required pursuant to Section 8.

“Default Effect” means multiplying the 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.

“DTC” means the Depository Trust Company.

“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.

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

“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

“DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system,
(b) Borrower has been approved (without revocation) by the DTC’s underwriting department, (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program, (d) the Conversion Shares are otherwise eligible for delivery via DWAC; (e) Borrower has previously delivered all Conversion Shares to Lender via DWAC; and (f) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

“Excluded Securities” means any shares of Common Stock, options, or convertible securities issued or issuable in connection with any Approved Stock Plan; provided
that the option term, exercise price or similar provisions of any issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Exchange Date.

“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.

“Major Default” means any Event of Default occurring under Sections 4.1(a), 4.1(k), or 4.1(o) of this Note.

 

 

 

“Mandatory Default Amount” means the greater of (a) the Outstanding Balance 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.

“Market Capitalization” means 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.

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

“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.

“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.

“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 Exchange
Fee, 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.

Par Value” means the par value of the Common Stock on any relevant date of determination. The Par Value as of the Exchange Date is $0.0001.

“Par Value Adjustment Amount” means an amount calculated as follows: (a) the number of Conversion Shares deliverable under a particular Conversion Notice (prior to any Par Value Adjustment) multiplied by the Par Value,
less (b) the Conversion Amount (prior to any Par Value Adjustment), plus (c) $500.00. For illustration purposes only, if for a given Conversion, the Conversion Amount was $20,000.00, the Conversion Price was $0.0008 and the Par Value was $0.001 then the Par Value Adjustment Amount would be $5,500.00 (25,000,000 Conversion Shares ($20,000.00/$0.0008) multiplied by the Par Value of $0.001 ($25,000.00) minus the Conversion Amount of $20,000.00 plus $500.00 equals $5,500.00).

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

“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.

 

 

EXHIBIT A

Chicago Venture Partners, L.P.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

GrowLife, Inc.                                                                                                                                           Date:
__________________

Attn: Marco Hegyi, CEO

5400 Carillon Point

Kirkland, Washington 98033

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to GrowLife, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 17, 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: ____________*

 

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

 

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

 

Name:         _____________________________________

Address:     _____________________________________

_____________________________________

 

To the extent the Lender Conversion Shares are not DTC Eligible, please deliver, via reputable overnight courier, a certificate representing the non-DTC Eligible Lender Conversion Shares to the party at the address set forth above.

 

 

[Remainder of page intentionally left blank]

 

 

 

Sincerely,

 

Lender:

 

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C.,

its General Partner

 

By: CVM, Inc., its Manager

 

 

By:                                                      

      John M. Fife, President

 

 

EXHIBIT B

Chicago Venture Partners, L.P.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

GrowLife, Inc.                                                                                                                                           Date:
__________________

Attn: Marco Hegyi, CEO

5400 Carillon Point

Kirkland, Washington 98033

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to GrowLife, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 17, 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. Par Value Adjustment Amount: _______________

E. Conversion Price: _______________ (Par Value)

F. Conversion Shares: _______________ (C divided by E)

F. Remaining Outstanding Balance of Note: ____________*

 

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

 

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

 

Name:        _____________________________________

Address:     _____________________________________

_____________________________________

 

To the extent the Lender Conversion Shares are not DTC Eligible, please deliver, via reputable overnight courier, a certificate representing the non-DTC Eligible Lender Conversion Shares to the party at the address set forth above.

 

The Par Value Adjustment Amount must be paid in cash within one (1) Trading Day of your receipt of this Conversion Notice.

 

 

[Remainder of page intentionally left blank]

 

 

Sincerely,

 

Lender:

 

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C.,

its General Partner

 

By: CVM, Inc., its Manager

 

 

By:                                                     

      John M. Fife, President

 

 

 

 

 

Exhibit C

 

           IRREVOCABLE LETTER OF INSTRUCTIONS TO TRANSFER AGENT

 

Date: August 17, 2016

 

To the transfer agent of GrowLife, Inc.

 

Re:           Instructions to Reserve and Issue Shares

 

Ladies and Gentlemen:

 

Reference is made to that certain Convertible Promissory Note having an original issue date of October 27, 2015 made by GrowLife, Inc., a Delaware corporation (“Company”), pursuant to which Company agreed to pay to Chicago Venture Partners, L.P., a Utah limited partnership, its successors and/or
assigns (“Investor”), the aggregate sum of $128,000.00, plus interest, fees, and collection costs (as the same may be amended or exchanged from time to time, the “Note”). The Note was issued in an exchange transaction comporting with Section 3(a)(9) of the Securities Act of 1933, as amended (the “1933 Act”), pursuant to that certain Exchange Agreement dated August
17, 2016, by and between Company and Investor (the “Exchange Agreement”, and together with the Note, the Subsequent Exchange Notes (as defined below) and all other documents entered into in conjunction therewith, including any amendments thereto, the “Exchange Documents”). In addition, as set forth in the Exchange Agreement, Investor may, from time to time, purchase certain additional Convertible Promissory Notes
(each, a “Subsequent Exchange Note”, and together with the Note, the “Notes”). Pursuant to the terms of the Notes, the Outstanding Balance (as defined in the Notes) of the Notes may be converted into shares of the common stock, par value $0.0001 per share, of Company (the “Common Stock”, and the shares of Common Stock issuable upon any conversion or otherwise
under the Notes, the “Shares”).

Pursuant to the terms of the Exchange Agreement, until all of Company’s obligations under the Exchange Agreement and the Notes are paid and performed in full, Company has agreed to at all times establish and maintain a reserve of shares of authorized but unissued Common Stock equal to the amount calculated as follows (such calculated amount
is referred to herein as the “Share Reserve”): three (3) times the number of Shares obtained by dividing the Outstanding Balance by the Conversion Price (as defined in the Notes).

This irrevocable letter of instructions (this “Letter”) shall serve as the authorization and direction of Company to Direct Transfer, LLC, or its successors, as Company’s transfer agent (hereinafter, “you” or “your”),
to reserve shares of Common Stock and to issue (or where relevant, to reissue in the name of Investor) shares of Common Stock to Investor or its broker, upon conversion of the Notes, as follows:

From and after the date hereof and until all of Company’s obligations under the Exchange Agreement and the Notes are paid and performed in full, (a) you shall establish a reserve of shares of authorized but unissued Common Stock in an amount not less than 215,000,000 shares (the “Transfer Agent Reserve”),
(b) you shall maintain and hold the Transfer Agent Reserve for the exclusive benefit of Investor, (c) you shall issue the shares of Common Stock held in the Transfer Agent Reserve to Investor or its broker only (subject to the immediately following clause (d)), (d) when you issue shares of Common Stock to Investor or its broker under the Notes pursuant to the other instructions in this Letter, you shall issue such shares from Company’s authorized and unissued shares of Common Stock to the extent the same
are available and not from the Transfer Agent Reserve unless and until there are no authorized shares of Common Stock available for issuance other than those held in the Transfer Agent Reserve, at which point, and upon your receipt of written authorization from Investor, you shall then issue any shares of Common Stock deliverable to Investor under the Notes from the Transfer Agent Reserve, (e) you shall not otherwise reduce the Transfer Agent Reserve under any circumstances, unless Investor delivers to you written
pre-approval of such reduction, and (f) you shall immediately add shares of Common Stock to the Transfer Agent Reserve in increments of 20,000,000 shares as and when requested by Company or Investor in writing from time to time, provided that such incremental increases do not cause the Transfer Agent Reserve to exceed the Share Reserve.

 

 

 

You shall issue the Shares to Investor or its broker in accordance with Paragraph 3 upon a conversion of all or any portion of the Notes, upon delivery to you of a duly executed Conversion Notice substantially in the form attached hereto as Exhibit A (a “Conversion
Notice”).

In connection with a Conversion Notice delivered to you pursuant to Paragraph 2 above, you will receive a legal opinion as to the free transferability of the Shares, dated within ninety (90) days from the date of the Conversion Notice, from either Investor’s or Company’s legal counsel, indicating that the Shares to be issued are registered
pursuant to an effective registration statement under the 1933 Act, or pursuant to Rule 144 promulgated under the 1933 Act (“Rule 144”), or any other available exemption under the 1933 Act, the issuance of the applicable Shares to Investor is exempt from registration under the 1933 Act, and thus the Shares may be issued or delivered without restrictive legend (the “Opinion Letter”). Upon your receipt of a Conversion
Notice and an Opinion Letter, you shall, within three (3) Trading Days (as defined below) thereafter, (i) if you are eligible to participate in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, and the Common Stock is eligible to be transferred electronically with DTC through the Deposit/Withdrawal at Custodian system (“DWAC Eligible”), credit such aggregate number of DWAC Eligible
shares of Common Stock to Investor’s or its designee’s balance account with DTC, provided Investor identifies its bank or broker (by providing its name and DTC participant number) and causes its bank or broker to initiate such DWAC Eligible transaction, or (ii) if the Common Stock is not then DWAC Eligible, issue and deliver to Investor or its broker (as specified in the applicable Conversion Notice), via reputable overnight courier, to the address specified in the Conversion Notice, a certificate,
registered in the name of Investor or its designee, representing such aggregate number of shares of Common Stock as have been requested by Investor to be transferred in the Conversion Notice. Such Shares (A) shall not bear any legend restricting transfer, (B) shall not be subject to any stop-transfer restrictions, and (C) shall otherwise be freely transferable on the books and records of Company. For purposes hereof, “Trading Day” shall mean any day on which
the New York Stock Exchange is open for trading.

If you receive a Conversion Notice, but you do not also receive an Opinion Letter, and you are required to issue the Shares in certificated form, then any certificates for the applicable Shares shall bear a restrictive legend substantially as follows:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
OR OTHER EVIDENCE ACCEPTABLE TO COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED, OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

 

 

 

Please note that a share issuance resolution is not required for each conversion since this Letter and the Exchange Documents have been approved by resolution of Company’s board of directors (the “Share Issuance Resolution”). Pursuant to the Share Issuance Resolution, all of the Shares are
authorized to be issued to Investor. For the avoidance of doubt, this Letter is your authorization and instruction by Company to issue the Shares pursuant to this Letter without any further authorization or direction from Company. You shall rely exclusively on the instructions in this Letter and shall have no liability for relying on any Conversion Notice provided by Investor. Any Conversion Notice delivered hereunder shall constitute an irrevocable instruction to you to process such notice or notices in accordance
with the terms thereof, without any further direction or inquiry. Such notice or notices may be transmitted to you by fax, email, or any commercially reasonable method.

Notwithstanding any other provision hereof, Company and Investor understand that you shall not be required to perform any issuance or transfer of Shares if (a) such an issuance or transfer of Shares is in violation of any state or federal securities laws or regulations; provided, however, that if you refuse
to issue Shares to Investor based on an assertion (whether by you, Company, or any other third party) that such issuance would be in violation of Rule 144, you are hereby instructed and agree to issue the applicable Shares to Investor with a restricted legend and to further provide a written opinion to Investor from an attorney explaining why such issuance is considered to be in violation of Rule 144, or (b) the issuance or transfer of Shares is prohibited or stopped as required or directed by a court order from
the court or arbitrator authorized by the Exchange Agreement to resolve disputes between Company and Investor. Additionally, Company and Investor understand that you shall not be required to perform any issuance or transfer of Shares if Company is in default of its payment obligations under its agreement with you; provided, however, that in such case Investor shall have the right to pay the applicable issuance or transfer fee on behalf of Company and upon payment of the
issuance or transfer fee by Investor, you shall be obligated to make the requested issuance or transfer.

You understand that a delay in the delivery of Shares hereunder could result in economic loss to Investor and that time is of the essence in your processing of each Conversion Notice.

You are hereby authorized and directed to promptly disclose to Investor, after Investor’s request from time to time, the total number of shares of Common Stock issued and outstanding and the total number of shares that are authorized but unissued and unreserved.

Company hereby confirms to you and to Investor that no instruction other than as contemplated herein (including instructions to increase the Transfer Agent Reserve as necessary pursuant to Paragraph 1(f) above) will be given to you by Company with respect to the matters referenced herein. Company hereby authorizes you, and you shall be obligated,
to disregard any contrary instruction received by or on behalf of Company or any other person purporting to represent Company.

Company hereby agrees not to change you as its transfer agent without first (a) providing Investor with at least 30-days’ written notice of such proposed change, and (b) obtaining Investor’s written consent to such proposed change. Any such consent is conditioned upon the new transfer agent executing an irrevocable letter of instructions
substantially similar to this Letter so that such transfer agent is bound by the same terms set forth herein. You agree not to help facilitate any change to Company’s transfer agent without first receiving such written consent to such change from Investor.

Company acknowledges that Investor is relying on the representations and covenants made by Company in this Letter and that the representations and covenants contained in this Letter constitute a material inducement to Investor to make the loan evidenced by the Notes. Company further acknowledges that without such representations and covenants of
Company, Investor would not have made the loan to Company evidenced by the Notes.

Company shall indemnify you and your officers, directors, members, managers, principals, partners, agents and representatives, and hold each of them harmless from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its attorneys) incurred by or asserted against you or any of them arising
out of or in connection with the instructions set forth herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself or themselves against any claim or liability hereunder, except that Company shall not be liable hereunder as to matters in respect of which it is determined that you have acted with gross negligence or in bad faith.

 

 

 

Investor is an intended third-party beneficiary of this Letter. The parties hereto specifically acknowledge and agree that in the event of a breach or threatened breach by a party hereto of any provision hereof, Investor will be irreparably damaged, and that damages at law would be an inadequate remedy if this Letter were not specifically enforced.
Therefore, in the event of a breach or threatened breach of this Letter, Investor shall be entitled, in addition to all other rights or remedies, to an injunction restraining such breach, without being required to show any actual damage or to post any bond or other security, and/or to a decree for a specific performance of the provisions of this Letter.

This Letter shall be fully binding and enforceable against Company even if it is not signed by you. If Company takes (or fails to take) any action contrary to this Letter, then such action or inaction will constitute a default under the Exchange Documents. Although no additional direction is required by Company, any refusal by Company to immediately
confirm this Letter and the instructions contemplated herein to you will constitute a default hereunder and under the Exchange Documents.

Whenever possible, each provision of this Letter shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Letter shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity
or unenforceability shall not affect the validity or enforceability of the remainder of this Letter or the validity or enforceability of this Letter in any other jurisdiction.

By signing below, (a) each individual executing this Letter on behalf of an entity represents and warrants that he or she has authority to so execute this Letter on behalf of such entity and thereby bind such entity to the terms and conditions hereof, and (b) each party to this Letter represents and warrants that such party has received good and
valuable consideration in exchange for executing this Letter.

This Letter is governed by Utah law.

This Letter is subject to the Arbitration Provisions (as defined in the Exchange Agreement) set forth as an exhibit to the Exchange Agreement (as defined in the Exchange Agreement), which you acknowledge having received and reviewed by your signature below. Each party consents to and expressly agrees that exclusive venue for arbitration of any dispute
arising out of or relating to this Letter or the relationship of the parties or their affiliates shall be in Salt Lake County or Utah County, Utah and, notwithstanding the terms (specifically including any governing law and venue terms) of any transfer agent services agreement or other agreement between you and Company (which agreement, if any, is hereby amended to the extent necessary in order to be consistent with the terms of this Letter and, for the avoidance of doubt, you and Company hereby agree that in
the event of any conflict between the terms of this Letter and any agreement between you and Company, the terms of this Letter shall govern), each party further agrees to not participate in any action, suit, proceeding or arbitration (including without limitation any action or proceeding seeking an injunction or temporary restraining order against your issuance of Shares to Investor) of any dispute arising out of or relating to this Letter or the relationship of the parties or their affiliates that takes place
outside of Salt Lake County, Utah.

Company hereby authorizes and directs you to provide to Investor a copy of any process, stop order, notice or other instructions delivered to you in furtherance of any attempt to prohibit or prevent you from issuing Shares to Investor. By your signature below, you covenant and agree to promptly and as soon as reasonably practicable provide to Investor,
upon a request from Investor, a copy of any such process, stop order, notice or other instructions.

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

 

 

Very truly yours,

 

GrowLife, Inc.

 

 

By: /s/ Marco Hegyi

Name: Marco Hegyi

Title: CEO

 

 

ACKNOWLEDGED AND AGREED:

 

INVESTOR:

 

Chicago Venture Partners, L.P.

 

By: Chicago Venture Management, L.L.C.,

 its General Partner

 

By: CVM, Inc., its Manager

 

 

By: /s/ John. M. Fife

      John M. Fife, President

 

 

TRANSFER AGENT:

 

Direct Transfer, LLC

 

 

By: /s/ Eddie Tobler

Name: Eddie Tobler

Title: VP Stock Transfer

 

 

Attachments:

 

Exhibit B   Form of Conversion Notice

 

 

 

 

EXHIBIT D

 

GROWLIFE, INC.

SECRETARY’S CERTIFICATE

 

I, Michael Fasci, hereby certify that I am the duly elected, qualified and acting Secretary of GrowLife, Inc., a Delaware corporation (“Company”), and am authorized to execute this Secretary’s Certificate (this “Certificate”) on behalf of Company.
This Certificate is delivered in connection with that certain Exchange Agreement dated August 17, 2016 (the “Exchange Agreement”), by and between Company and Chicago Venture Partners, L.P., a Utah limited partnership.

Solely in my capacity as Secretary, I certify that attached hereto as Schedule 1 is a true, accurate and complete copy of all of the resolutions adopted by the Board of Directors of Company (the “Resolutions”) approving and authorizing the execution,
delivery and performance of the Exchange Agreement and related documents to which Company is a party on the date hereof, and the transactions contemplated thereby. Such Resolutions have not been amended, rescinded or modified since their adoption and remain in effect as of the date hereof.

IN WITNESS WHEREOF, I have executed this Secretary’s Certificate effective as of August 17, 2016.

GrowLife, Inc.

 

 

/s/ Michael Fasci

Printed Name: Michael Fasci

Title: Secretary

 

 

 

 

Schedule 1

 

BOARD RESOLUTIONS

 

[attached]

 

 

 

 

GROWLIFE, INC.

RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS

________________________

 

Effective August 17, 2016

________________________

 

APPROVAL OF EXCHANGE

 

WHEREAS, the Board of Directors (the “Board”) of GrowLife, Inc., a Delaware corporation (“Company”), hereby ratifies and confirms that certain Amended, Restated and Consolidated Senior Convertible Redeemable Debenture in the original principal amount
of $1,050,000.00 having an original issuance date of October 27, 2015 (the “Prior Note”), issued by Company to Chicago Venture Partners, L.P., a Utah limited partnership (“Investor”);

WHEREAS, Investor desires to exchange (the “Exchange”) (i) that certain First Replacement Amended, Restated and Consolidated Senior Secured Convertible Redeemable Debenture A in the original principal amount of $80,000.00 dated and made effective as of August 17, 2016 but having an original issuance
date of October 27, 2015 pursuant to the terms and conditions of that certain Exchange Agreement of even date herewith, substantially in the form attached hereto as Exhibit A (the “Exchange Agreement”), for an Exchange Note, substantially in the form attached hereto as Exhibit B (the “Initial Exchange Note”) and (ii)
certain additional Debentures that may be severed from the Prior Note and purchased by Investor from time to time pursuant to the Exchange Agreement, and exchange such Debentures for additional Convertible Promissory Notes, substantially in the form attached hereto as Exhibit C (each, a “Subsequent Exchange Note”, and together with the Initial Exchange Note, the “Exchange Notes”);

WHEREAS, the terms of the Exchange are further reflected in an Irrevocable Letter of Instructions to Transfer Agent substantially in the form attached hereto as Exhibit D, a Share Issuance Resolution substantially in the form attached hereto as Exhibit E (“Share
Issuance Resolution”), and all other agreements, certificates, instruments and documents being or to be executed and delivered under or in connection with the Exchange (collectively with the Exchange Agreement and the Exchange Notes, the “Exchange Documents”);

WHEREAS, the Board, having received and reviewed the Exchange Documents, believes that it is in the best interests of Company and its stockholders to approve the Exchange and the Exchange Documents and authorize the officers of Company to execute the Exchange Documents and issue the Exchange Notes to Investor.

NOW, THEREFORE, BE IT:

RESOLVED, that the Exchange is hereby approved and determined to be in the best interests of Company and its stockholders;

RESOLVED, that the form, terms and provisions of the Exchange Documents are hereby ratified, confirmed and approved (including all exhibits, schedules and other attachments thereto);

RESOLVED, that the Exchange Notes shall be duly and validly issued upon the issuance and delivery thereof in accordance with the Exchange Agreement;

 

 

 

RESOLVED, that upon the issuance and delivery thereof in accordance with the Exchange Notes, the Conversion Shares (as defined in the Exchange Notes) shall be duly and validly issued, fully paid for, and non-assessable;

RESOLVED, that Company shall take all action necessary to at all times have authorized and reserved for the purpose of issuance under the Exchange Notes such number of shares of Company’s Common Stock required under the Exchange Agreement (the “Share Reserve”);

RESOLVED FURTHER, that the fixed number of shares of common stock set forth in the Share Issuance Resolution to be reserved by the transfer agent (the “Transfer Agent Reserve”) is not meant to limit or restrict in any way the resolutions contained herein, including without limitation the calculation
of the Share Reserve under the Exchange Agreement, as required from time to time;

RESOLVED FURTHER, that each of the officers of Company be, and each of them hereby is, authorized to instruct the transfer agent to increase the Transfer Agent Reserve in the incremental amount set forth in the Share Issuance Resolution, from time to time, to correspond to the Share Reserve; provided, however,
that any decrease in the Transfer Agent Reserve will require the prior written consent of Investor;

RESOLVED FURTHER, that with respect to each Conversion (as defined in the Exchange Notes) under the Exchange Notes, the reduction in the Outstanding Balance (as defined in the Exchange Notes and as the same may increase or decrease pursuant to the terms of the Exchange Notes) in an amount equal to the applicable Conversion Amount (as defined in the
Exchange Notes) being converted into Conversion Shares shall constitute fair and adequate consideration to Company for the issuance of the applicable Conversion Shares, regardless of the conversion price used to determine the number of Conversion Shares deliverable with respect to any Conversion;

RESOLVED, that each of the officers of Company be, and each of them hereby is, authorized to execute and deliver in the name of and on behalf of Company, the Exchange Documents and any other related agreements (with such additions to, modifications to, or deletions from such documents as the officer approves, such approval to be conclusively evidenced
by such execution and delivery), to conform Company’s minute books and other records to the matters set forth in these resolutions, and to take all other actions on behalf of Company as any of them deem necessary, required, or advisable with respect to the matters set forth in these resolutions;

RESOLVED, that the Board hereby determines that all acts and deeds previously performed by the Board and other officers of Company relating to the foregoing matters prior to the date of these resolutions are ratified, confirmed and approved in all respects as the authorized acts and deeds of Company; and

RESOLVED, that all prior actions or resolutions of the Board that are inconsistent with the foregoing are hereby amended, corrected and restated to the extent required to be consistent herewith.

******************

 

EXHIBITS ATTACHED TO BOARD RESOLUTIONS:

 

Exhibit B

EXCHANGE AGREEMENT

Exhibit C

INITIAL EXCHANGE NOTE

Exhibit D

FORM OF SUBSEQUENT EXCHANGE NOTE

Exhibit E

TRANSFER AGENT LETTER

Exhibit F

SHARE ISSUANCE RESOLUTION

 

 

 

 

[Remainder of page intentionally left blank]  

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

Exhibit E

 

Share Issuance Resolution

Authorizing The Issuance Of New Shares Of Common Stock In

 

GrowLife, Inc.

___________________________

 

Effective August 17, 2016

___________________________

 

The undersigned, as a qualified officer of GrowLife, Inc., a Delaware corporation (“Company”), hereby certifies that this Share Issuance Resolution is authorized by and consistent with the resolutions of Company’s board of directors (“Board Resolutions”)
regarding that certain Convertible Promissory Note in the face amount of $128,000.00 dated and made effective as of August 17, 2016 but having an original issuance date of October 27, 2015 (the “Note,” and together with all other Convertible Promissory Notes issued under the Exchange Agreement (as defined below), the “Notes”), made by Company in favor of Chicago Venture Partners, L.P., a Utah limited partnership,
its successors and/or assigns (“Investor”), pursuant to that certain Exchange Agreement dated August 17, 2016, by and between Company and Investor (the “Exchange Agreement”).

RESOLVED, that Direct Transfer, LLC as transfer agent (including any successor transfer agent, the “Transfer Agent”) of shares of Company’s common stock, $0.0001 par value per share (“Common Stock”), is authorized to rely upon a Conversion
Notice substantially in the form of Exhibit A attached hereto, whether an original or a copy (the “Conversion Notice”), without any further inquiry, to be delivered to the Transfer Agent from time to time either by Company or Investor.

RESOLVED FURTHER, that the Transfer Agent is authorized to issue the number of:

(i)

“Conversion Shares” (representing shares of Common Stock) set forth in each Conversion Notice delivered to the Transfer Agent, and

(ii)

all additional shares of Common Stock Company may subsequently instruct the Transfer Agent to issue in connection with any of the foregoing or otherwise under the Notes,

in each case with such shares to be issued in the name of Investor, or its successors, transferees, or designees, free of any restricted security legend, as permitted by the Notes.

RESOLVED FURTHER, that consistent with the terms of the Exchange Agreement, the Transfer Agent is authorized and directed to immediately create a transfer agent share reserve equal to 215,000,000 shares of Company’s Common Stock for the benefit of Investor (the “Transfer Agent Reserve”); provided
that the Transfer Agent Reserve may increase in increments of 20,000,000 shares from time to time by written instructions provided to the Transfer Agent by Company or Investor as required by the Exchange Agreement and as contemplated by the Board Resolutions.

RESOLVED FURTHER, that Investor and the Transfer Agent may rely upon the more general approvals and authorizations set forth in the Board Resolutions, and the Transfer Agent is hereby authorized and directed to take those further actions approved under the Board Resolutions.

 

 

 

RESOLVED FURTHER, that Investor must consent in writing to any reduction of the Transfer Agent Reserve; provided, however, that upon full conversion and/or full repayment of all Notes, the Transfer Agent Reserve will terminate thirty (30) days thereafter.

RESOLVED FURTHER, that Company shall indemnify the Transfer Agent and its employees against any and all loss, liability, damage, claim or expenses incurred by or asserted against the Transfer Agent arising from any action taken by the Transfer Agent in reliance upon this Share Issuance Resolution.

Nothing in this Share Issuance Resolution shall limit or restrict those resolutions and authorizations set forth in the Board Resolutions, including without limitation, the calculation from time to time of the Share Reserve (as defined in the Exchange Agreement).

The undersigned officer of Company hereby certifies that this is a true copy of Company’s Share Issuance Resolution, effective as of the date set forth below, and that said resolution has not been in any way rescinded, annulled, or revoked, but the same is still in full force and effect.

 

/s/ Marco Hegyi                                                       August 17, 2016

Officer’s Signature                                                   Date

 

Marco Hegyi

Printed Name and Title

 

 

EXHIBITS ATTACHED TO SHARE ISSUANCE RESOLUTION:

 

Exhibit A                       Conversion Notice

 

 

 

 

EXHIBIT F

 

GROWLIFE, INC.

OFFICER’S CERTIFICATE

 

 

The undersigned, Marco Hegyi, Chief Executive Officer of GrowLife, Inc., a Delaware corporation (“Company”), in connection with the issuance of that certain Convertible Promissory Note in favor of Chicago Venture Partners, L.P., a Utah limited partnership (“Investor”)
in the original principal amount of $128,000.00 dated and made effective on August 17, 2016 but having an original issuance date of October 27, 2016 (the “Note,” and together with all other Convertible Promissory Notes issued under the Exchange Agreement (as defined below), the “Notes”), pursuant to that certain Exchange Agreement dated August 17, 2016 between Investor and Company (the “Exchange
Agreement”), in his capacity as an officer of Company, hereby represents, warrants and certifies that:

 

1. He is the duly appointed Chief Executive Officer of Company.

 

2. As of the date hereof, Company has one (1) Variable Security Holder (as defined in the Exchange Agreement).

 

3. He agrees to cause Company to comply with the covenants found in Sections 8(v), 8(vi) and (vii) of the Exchange Agreement.

12. 

4. He acknowledges that his execution and issuance of this Officer’s Certificate to Investor is a material inducement to Investor’s agreement to purchase and exchange the Notes on the terms set forth in the Exchange Agreement and that but for his execution
and issuance of this Officer’s Certificate, Investor would not have purchased the Notes from Company.

 

IN WITNESS WHEREOF, the undersigned, in his capacity as an officer of Company, has executed this Officer’s Certificate as of August 17, 2016.

 

 

/s/ Marco Hegyi

Marco Hegyi

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