Document:

Blueprint

 

exhibit 10.1

Securities Purchase Agreement

 

This Securities Purchase
Agreement (this “Agreement”), dated as of October
15, 2018, is entered into by and between Growlife, Inc., a Delaware
corporation (“Company”), and Iliad Research and Trading, L.P.,
a Utah limited partnership, its successors and/or assigns
(“Investor”).

 

A.           Company
and Investor are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded
by the Securities Act of 1933, as amended (the “1933 Act”), and the rules and
regulations promulgated thereunder by the United States Securities
and Exchange Commission (the “SEC”).

 

B.           Investor
desires to purchase and Company desires to issue and sell, upon the
terms and conditions set forth in this Agreement (i) a Secured
Convertible Promissory Note, in the form attached hereto as
Exhibit A, in the
original principal amount of $775,000.00 (the “Note”), convertible into shares of
common stock, $0.0001 par value per share, of Company (the
“Common Stock”),
upon the terms and subject to the limitations and conditions set
forth in such Note, and (ii) a Warrant to Purchase Shares of Common
Stock, substantially in the form attached hereto as Exhibit B (the
“Warrant”).

 

C.           This
Agreement, the Note, the Warrant, the Security Agreement (as
defined below), and all other certificates, documents, agreements,
resolutions and instruments delivered to any party under or in
connection with this Agreement, as the same may be amended from
time to time, are collectively referred to herein as the
“Transaction
Documents”.

 

D.           For
purposes of this Agreement: “Conversion Shares” means all
shares of Common Stock issuable upon conversion of all or any
portion of the Note; “Warrant
Shares” means all shares of Common Stock issuable upon
the exercise of or pursuant to the Warrant; and “Securities” means the Note, the
Conversion Shares, the Warrant and the Warrant Shares.

 

NOW, THEREFORE, in consideration of the
above recitals and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Company
and Investor hereby agree as follows:

 

1. Purchase and Sale of
Securities.

 

1.1. Purchase
of Securities. Company shall issue and sell to Investor and
Investor shall purchase from Company the Note and the Warrant. In
consideration thereof, Investor shall pay the Purchase Price (as
defined below) to Company.

 

1.2. Form of Payment. On the Closing
Date (as defined below), Investor shall pay the Purchase Price to
Company via wire transfer of immediately available funds against
delivery of the Note and the Warrant.

 

1.3. Closing
Date. Subject to the satisfaction (or written waiver) of the
conditions set forth in Section 5 and Section 6 below, the date of
the issuance and sale of the Securities pursuant to this Agreement
(the “Closing
Date”) shall be October 15, 2018, or such other
mutually agreed upon date. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the
Closing Date by means of the exchange by email of signed .pdf
documents, but shall be deemed for all purposes to have occurred at
the offices of Hansen Black Anderson Ashcraft PLLC in Lehi,
Utah.

 

1.4. Collateral
for the Note. The Note shall be
secured by the collateral set forth in that certain Security
Agreement attached hereto as Exhibit
D listing all of
Company’s assets as security for Company’s obligations
under the Transaction Documents (the
“Security
Agreement”).

 

 

1

 

 

1.5. Original
Issue Discount; Transaction Expense Amount. The Note carries
an original issue discount of $70,000.00 (the “OID”). In addition, Company agrees to pay
$5,000.00 to Investor to cover Investor’s legal fees,
accounting costs, due diligence, monitoring and other transaction
costs incurred in connection with the purchase and sale of the
Securities (the “Transaction
Expense Amount”), all of which amount is included in
the initial principal balance of the Note. The “Purchase Price”, therefore, shall
be $700,000.00, computed as follows: $775,000.00 initial principal
balance, less the OID, less the Transaction Expense
Amount.

 

2. Investor’s Representations and
Warranties. Investor represents and warrants to Company that
as of the Closing Date: (i) this Agreement has been duly and
validly authorized; (ii) this Agreement constitutes a valid and
binding agreement of Investor enforceable in accordance with its
terms; and (iii) Investor is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D of the 1933
Act.

 

3. Company’s Representations and
Warranties. Company represents and warrants to Investor that
as of the Closing Date: Company is a corporation duly organized,
validly existing and in good standing under the laws of its state
of incorporation and has the requisite corporate power to own its
properties and to carry on its business as now being conducted;
Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such
qualification necessary; Company has registered its Common Stock
under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the “1934
Act”), and is obligated to file reports pursuant to
Section 13 or Section 15(d) of the 1934 Act; each of the
Transaction Documents and the transactions contemplated hereby and
thereby, have been duly and validly authorized by Company and all
necessary actions have been taken; this Agreement, the Note, the
Security Agreement, the Warrant, and the other Transaction
Documents have been duly executed and delivered by Company and
constitute the valid and binding obligations of Company enforceable
in accordance with their terms; the execution and delivery of the
Transaction Documents by Company, the issuance of Securities in
accordance with the terms hereof, and the consummation by Company
of the other transactions contemplated by the Transaction Documents
do not and will not conflict with or result in a breach by Company
of any of the terms or provisions of, or constitute a default under
(a) Company’s formation documents or bylaws, each as
currently in effect, (b) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which Company is a party
or by which it or any of its properties or assets are bound,
including, without limitation, any listing agreement for the Common
Stock, or (c) any existing applicable law, rule, or regulation or
any applicable decree, judgment, or order of any court, United
States federal, state or foreign regulatory body, administrative
agency, or other governmental body having jurisdiction over Company
or any of Company’s properties or assets; no further
authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange
or market or the stockholders or any lender of Company is required
to be obtained by Company for the issuance of the Securities to
Investor or the entering into of the Transaction Documents; none of
Company’s filings with 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; Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by Company with the SEC under the 1934 Act on a timely
basis or has received a valid extension of such time of filing and
has filed any such report, schedule, form, statement or other
document prior to the expiration of any such extension; there is no
action, suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of
Company, threatened against or affecting Company before or by any
governmental authority or non-governmental department, commission,
board, bureau, agency or instrumentality or any other person,
wherein an unfavorable decision, ruling or finding would have a
material adverse effect on Company or which would adversely affect
the validity or enforceability of, or the authority or ability of
Company to perform its obligations under, any of the Transaction
Documents; Company has not consummated any financing transaction
that has not been disclosed in a periodic filing or current report
with the SEC under the 1934 Act; Company is not, nor has it been at
any time in the previous twelve (12) months, a “Shell
Company,” as such type of “issuer” is described
in Rule 144(i)(1) under the 1933 Act; with respect to any
commissions, placement agent or finder’s fees or similar
payments that will or would become due and owing by Company to any
person or entity as a result of this Agreement or the transactions
contemplated hereby (“Broker
Fees”), any such Broker Fees will be made in full
compliance with all applicable laws and regulations and only to a
person or entity that is a registered investment adviser or
registered broker-dealer; Investor shall have no obligation with
respect to any Broker Fees or with respect to any claims made by or
on behalf of other persons for fees of a type contemplated in this
subsection that may be due in connection with the transactions
contemplated hereby and Company shall indemnify and hold harmless
each of Investor, Investor’s employees, officers, directors,
stockholders, members, managers, agents, 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 Broker Fees; when issued, the Conversion Shares and the
Warrant Shares will be duly authorized, validly issued, fully paid
for and non-assessable, free and clear of all liens, claims,
charges and encumbrances; neither Investor nor any of its officers,
directors, stockholders, members, managers, employees, agents or
representatives has made any representations or warranties to
Company or any of its officers, directors, employees, agents or
representatives except as expressly set forth in the Transaction
Documents and, in making its decision to enter into the
transactions contemplated by the Transaction Documents, Company is
not relying on any representation, warranty, covenant or promise of
Investor or its officers, directors, members, managers, employees,
agents or representatives other than as set forth in the
Transaction Documents; Company acknowledges that the State of Utah
has a reasonable relationship and sufficient contacts to the
transactions contemplated by the Transaction Documents and any
dispute that may arise related thereto such that the laws and venue
of the State of Utah, as set forth more specifically in Section 9.3
below, shall be applicable to the Transaction Documents and the
transactions contemplated therein; and  Company has performed due diligence and background
research on Investor and its affiliates including, without
limitation, John M. Fife, and, to its satisfaction, has made
inquiries with respect to all matters Company may consider
relevant to the undertakings and
relationships contemplated by the Transaction Documents including,
among other things, the following:
http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC;
SEC Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No.
07-CV-347 (N.D. Ill.); and
FINRA Case #2011029203701.
Company, being aware of the matters described in subsection
(xviii) above, acknowledges and agrees that such
matters, or any similar matters, have no bearing on the
transactions contemplated by the Transaction Documents and
covenants and agrees it will not use any such information as a
defense to performance of its obligations under the Transaction
Documents or in any attempt to avoid, modify or reduce such
obligations.

 

 

2

 

 

4. Company Covenants. Until all of
Company’s obligations under all of the Transaction Documents
are paid and performed in full, or within the timeframes otherwise
specifically set forth below, Company will at all times comply with
the following covenants: so long as Investor beneficially owns any
of the Securities and for at least twenty (20) Trading Days (as
defined in the Note) thereafter, Company will timely file on the
applicable deadline all reports required to be filed with the SEC
pursuant to Sections 13 or 15(d) of the 1934 Act, and will
take all reasonable action under its control to ensure that
adequate current public information with respect to Company, as
required in accordance with Rule 144 of the 1933 Act, is publicly
available, and will not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination; the
Common Stock shall be listed or quoted for trading on any of (a)
NYSE, (b) NASDAQ, (c) OTCQX, or (d) OTCQB; when issued, the
Conversion Shares and the Warrant Shares will be duly authorized,
validly issued, fully paid for and non-assessable, free and clear
of all liens, claims, charges and encumbrances; trading in
Company’s Common Stock will not be suspended, halted,
chilled, frozen, reach zero bid or otherwise cease on
Company’s principal trading market; after the Closing Date,
Company will not make any Variable Security Issuances (as defined
below) without Investor’s prior written consent, which
consent may be granted or withheld in Investor’s sole and
absolute discretion; at Closing and on the first day of each
calendar quarter for so long as the Note remains outstanding or on
any other date during which the Note is outstanding, as may be
requested by Investor, Company shall cause its Chief Executive
Officer to provide to Investor a certificate in substantially the
form attached hereto as Exhibit C (the
“Officer’s
Certificate”) certifying in his personal capacity and
in his capacity as Chief Executive Officer of Company the number of
Variable Security Holders of Company as of the date the applicable
Officer’s Certificate is executed; and if at any time the
Common Stock trades below $0.0001, 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 Issuance” means
any issuance of any 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, (B) are issued to any person or entity on the
Restricted Investor List (as defined below) regardless of the
terms, conditions or features of such securities, or (C) 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. 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. For purposes hereof, the term
“Restricted Investor
List” means any person or entity listed on
Exhibit I or any
affiliate, owner, member or shareholder of any person or entity
listed on Exhibit
I.

 

5. Conditions to Company’s
Obligation to Sell. The obligation of Company hereunder to
issue and sell the Securities to Investor at the Closing is subject
to the satisfaction, on or before the Closing Date, of each of the
following conditions:

 

5.1. Investor
shall have executed this Agreement and delivered the same to
Company.

 

5.2. Investor
shall have delivered the Purchase Price to Company in accordance
with Section 1.2 above.

 

 

3

 

 

6. Conditions to Investor’s
Obligation to Purchase. The obligation of Investor hereunder
to purchase the Securities at the Closing is subject to the
satisfaction, on or before the Closing Date, of each of the
following conditions, provided that these conditions are for
Investor’s sole benefit and may be waived by Investor at any
time in its sole discretion:

 

6.1. Company
shall have executed this Agreement, the Warrant, and the Note and
delivered the same to Investor.

 

6.2. Company’s
Chief Executive Officer shall have executed the Officer’s
Certificate and delivered the same to Investor.

 

6.3. Company
shall have delivered to Investor a fully executed Irrevocable
Letter of Instructions to Transfer Agent (the “TA Letter”) substantially in the
form attached hereto as Exhibit E acknowledged and
agreed to in writing by Company’s transfer agent (the
“Transfer
Agent”).

 

6.4. Company
shall have delivered to Investor a fully executed Secretary’s
Certificate substantially in the form attached hereto as
Exhibit F
evidencing Company’s approval of the Transaction
Documents.

 

6.5. Company
shall have delivered to Investor a fully executed Share Issuance
Resolution substantially in the form attached hereto as
Exhibit G to be
delivered to the Transfer Agent.

 

6.6.  Company
shall have delivered to Investor fully executed copies of the
Security Agreement and all other Transaction Documents required to
be executed by Company herein or therein.

 

7. Reservation of Shares. On the
date hereof, Company will reserve 350,000,000 shares of Common
Stock from its authorized and unissued Common Stock to provide for
all issuances of Common Stock under the Note and Warrant (the
“Share
Reserve”). Company further agrees to add additional
shares of Common Stock to the Share Reserve in increments of
5,000,000 shares as and when requested by Investor if as of the
date of any such request the number of shares being held in the
Share Reserve is less than (i) three (3) times the number of shares
of Common Stock obtained by dividing the Outstanding Balance (as
defined in the Note) as of the date of the request by the
Conversion Price (as defined in the Note), plus (ii) three (3) times the number of
Warrant Shares (as determined pursuant to the Warrant) deliverable
upon full exercise of the Warrant. Company shall further require
the Transfer Agent to hold the shares of Common Stock reserved
pursuant to the Share Reserve exclusively for the benefit of
Investor and to issue such shares to Investor promptly upon
Investor’s delivery of a conversion notice under the Note or
a notice of exercise under the Warrant. Finally, Company shall
require the Transfer Agent to issue shares of Common Stock pursuant
to the Note and the Warrant to Investor out of its authorized and
unissued shares, and not the Share Reserve, to the extent shares of
Common Stock have been authorized, but not issued, and are not
included in the Share Reserve. The Transfer Agent shall only issue
shares out of the Share Reserve to the extent there are no other
authorized shares available for issuance and then only with
Investor’s written consent.

 

8. Terms of Future Financings. So
long as the Note is outstanding, upon any issuance by Company of
any security with any term or condition more favorable to the
holder of such security or with a term in favor of the holder of
such security that was not similarly provided to Investor in the
Transaction Documents, then Company shall notify Investor of such
additional or more favorable term and such term, at
Investor’s option, shall become a part of the Transaction
Documents for the benefit of Investor. Additionally, if Company
fails to notify Investor of any such additional or more favorable
term, but Investor becomes aware that Company has granted such a
term to any third party, Investor may notify Company of such
additional or more favorable term and such term shall become a part
of the Transaction Documents retroactive to the date on which such
term was granted to the applicable third party. The types of terms
contained in another security that may be more favorable to the
holder of such security include, but are not limited to, terms
addressing conversion discounts, conversion lookback periods,
interest rates, original issue discounts, stock sale price,
conversion price per share, warrant coverage, warrant exercise
price, and anti-dilution/conversion and exercise price
resets.

 

 

4

 

 

9. Miscellaneous. The provisions
set forth in this Section 9 shall apply to this Agreement, as well
as all other Transaction Documents as if these terms were fully set
forth therein; provided, however, that in the event there is a
conflict between any provision set forth in this Section 9 and any
provision in any other Transaction Document, the provision in such
other Transaction Document shall govern.

 

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

 

9.2. Arbitration
of Claims. The parties shall submit all Claims (as defined
in Exhibit H)
arising under this Agreement or any other Transaction Document or
any other agreement between the parties and their affiliates or any
Claim relating to the relationship of the parties to binding
arbitration pursuant to the arbitration provisions set forth in
Exhibit H attached
hereto (the “Arbitration
Provisions”). For avoidance of doubt, the parties
agree that the injunction described in Section 9.4 below may be
pursued in an arbitration that is separate and apart from any other
arbitration regarding any other Claims arising under the
Transaction Documents. 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, Company represents,
warrants and covenants that 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 Company will not take a position contrary to the foregoing
representations. Company acknowledges and agrees that Investor may
rely upon the foregoing representations and covenants of Company
regarding the Arbitration Provisions.

 

9.3. Governing Law; Venue. This
Agreement shall be construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation
and performance of this Agreement shall be governed by, the
internal laws of the State of Utah, without giving effect to any
choice of law or conflict of law provision or rule (whether of the
State of Utah or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Utah. Each party consents to and expressly agrees that the
exclusive venue for arbitration of any dispute arising out of or
relating to any Transaction Document 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, for any
litigation arising in connection with any of the Transaction
Documents (and notwithstanding the terms (specifically including
any governing law and venue terms) of any transfer agent services
agreement or other agreement between the Transfer Agent and
Company, such litigation specifically includes, without limitation
any action between or involving Company and the Transfer Agent
under the TA Letter or otherwise related to Investor in any way
(specifically including, without limitation, any action where
Company seeks to obtain an injunction, temporary restraining order,
or otherwise prohibit the Transfer Agent from issuing shares of
Common Stock to Investor for any reason)), each party hereto hereby
(i) consents to and expressly submits to the exclusive personal
jurisdiction of any state or federal court sitting in Salt Lake
County, Utah, (ii) expressly submits to the exclusive venue of any
such court for the purposes hereof, (iii) agrees to not bring any
such action (specifically including, without limitation, any action
where Company seeks to obtain an injunction, temporary restraining
order, or otherwise prohibit the Transfer Agent from issuing shares
of Common Stock to Investor for any reason) outside of any state or
federal court sitting in Salt Lake County, Utah, and (iv) waives
any claim of improper venue and any claim or objection that such
courts are an inconvenient forum or any other claim, defense or
objection to the bringing of any such proceeding in such
jurisdiction or to any claim that such venue of the suit, action or
proceeding is improper. Finally, Company covenants and agrees to
name Investor as a party in interest in, and provide written notice
to Investor in accordance with Section 9.13 below prior to bringing
or filing, any action (including without limitation any filing or
action against any person or entity that is not a party to this
Agreement, including without limitation the Transfer Agent) that is
related in any way to the Transaction Documents or any transaction
contemplated herein or therein, including without limitation any
action brought by Company to enjoin or prevent the issuance of any
shares of Common Stock to Investor by the Transfer Agent, and
further agrees to timely name Investor as a party to any such
action. Company acknowledges that the governing law and venue
provisions set forth in this Section 9.3 are material terms to
induce Investor to enter into the Transaction Documents and that
but for Company’s agreements set forth in this Section 9.3
Investor would not have entered into the Transaction
Documents.

 

 

5

 

 

9.4. Specific Performance. Company
acknowledges and agrees that Investor may suffer irreparable harm
in the event that Company fails to perform any material provision
of this Agreement or any of the other Transaction Documents in
accordance with its specific terms. It is accordingly agreed that
Investor shall be entitled to one or more injunctions to prevent or
cure breaches of the provisions of this Agreement or such other
Transaction Document and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other
remedy to which the Investor may be entitled under the Transaction
Documents, at law or in equity. Company specifically agrees that
following an Event of Default (as defined in the Note) under the
Note, Investor shall have the right to seek and receive injunctive
relief from a court or an arbitrator prohibiting Company from
issuing any of its common or preferred stock to any party unless
the Note is being paid in full simultaneously with such issuance.
For the avoidance of doubt, in the event Investor seeks to obtain
an injunction from a court or an arbitrator against Company or
specific performance of any provision of any Transaction Document,
such action shall not be a waiver of any right of Investor under
any Transaction Document, at law, or in equity, including without
limitation its rights to arbitrate any Claim pursuant to the terms
of the Transaction Documents, nor shall Investor’s pursuit of
an injunction prevent Investor, under the doctrines of claim
preclusion, issues preclusion, res judicata or other similar legal
doctrines, from pursuing other Claims in the future in a separate
arbitration.

 

9.5. Calculation
Disputes. Notwithstanding the Arbitration Provisions, in the
case of a dispute as to any determination or arithmetic calculation
under the Transaction Documents, including without limitation,
calculating the Outstanding Balance, Warrant Shares, Exercise
Shares (as defined in the Warrant), Delivery Shares (as defined in
the Warrant), Conversion Price, Conversion Shares, or VWAP (as
defined in the Note) (each, a “Calculation”), Company or Investor
(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 Company or Investor (as the case may be) or (ii) if
no notice gave rise to such dispute, at any time after Investor
learned of the circumstances giving rise to such dispute. If
Investor and Company are unable to agree upon such Calculation
within two (2) Trading Days of such disputed Calculation being
submitted to Company or Investor (as the case may be), then
Investor will promptly submit via email or facsimile the disputed
Calculation to Unkar Systems Inc. (“Unkar Systems”). Investor shall
cause Unkar Systems to perform the Calculation and notify Company
and Investor 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 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 Company is the losing
party, no extension of the Delivery Date (as defined in the Note)
shall be granted and Company shall incur all effects for failing to
deliver the applicable shares in a timely manner as set forth in
the Transaction Documents. Notwithstanding the foregoing, Investor
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 Investor.

 

9.6. Counterparts.
Each Transaction Document 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 a Transaction Document (or such party’s
signature page thereof) will be deemed to be an executed original
thereof.

 

9.7. Document
Imaging. Investor 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 Company’s loans, including,
without limitation, this Agreement and the other Transaction
Documents, and Investor may destroy or archive the paper
originals. The parties hereto (i) waive any right to insist or
require that Investor produce paper originals, (ii) agree that such
images shall be accorded the same force and effect as the paper
originals, (iii) agree that Investor 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 (iv) further agree that any executed
facsimile (faxed), scanned, emailed, or other imaged copy of this
Agreement or any other Transaction Document shall be deemed to be
of the same force and effect as the original manually executed
document.

 

 

6

 

 

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

 

9.9. Severability.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform to
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.

 

9.10. Entire
Agreement. This Agreement, together with the other
Transaction Documents, contains 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 Company
nor Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. For the avoidance of
doubt, all prior term sheets or other documents between Company and
Investor, or any affiliate thereof, related to the transactions
contemplated by the Transaction Documents (collectively,
“Prior
Agreements”), that may have been entered into between
Company and Investor, or any affiliate thereof, are hereby null and
void and deemed to be replaced in their entirety by the Transaction
Documents. To the extent there is a conflict between any term set
forth in any Prior Agreement and the term(s) of the Transaction
Documents, the Transaction Documents shall govern.

 

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

 

9.12. Amendments.
No provision of this Agreement may be waived or amended other than
by an instrument in writing signed by both parties
hereto.

 

9.13. 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
Company:

 

Growlife,
Inc.

Attn:
Marco Hegyi

5400
Carillon Point

Kirkland,
Washington 98033

 

 

7

 

 

If to
Investor:

 

Iliad
Research and Trading, 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

 

9.14. Successors
and Assigns. This Agreement or any of the severable rights
and obligations inuring to the benefit of or to be performed by
Investor hereunder may be assigned by Investor to a third party,
including its affiliates, in whole or in part, without the need to
obtain Company’s consent thereto. Company may not assign its
rights or obligations under this Agreement or delegate its duties
hereunder without the prior written consent of
Investor.

 

9.15. Survival.
The representations and warranties of Company and the agreements
and covenants set forth in this Agreement shall survive the Closing
hereunder notwithstanding any due diligence investigation conducted
by or on behalf of Investor. Company agrees to indemnify and hold
harmless Investor and all its officers, directors, employees,
attorneys, and agents for loss or damage arising as a result of or
related to any breach or alleged breach by Company of any of its
representations, warranties and covenants set forth in this
Agreement or any of its covenants and obligations under this
Agreement, including advancement of expenses as they are
incurred.

 

9.16. 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.

 

9.17. Investor’s
Rights and Remedies Cumulative; Liquidated Damages. All
rights, remedies, and powers conferred in this Agreement and the
Transaction Documents are cumulative and not exclusive of any other
rights or remedies, and shall be in addition to every other right,
power, and remedy that Investor may have, whether specifically
granted in this Agreement or any other Transaction Document, or
existing at law, in equity, or by statute, and any and all such
rights and remedies may be exercised from time to time and as often
and in such order as Investor may deem expedient. The parties
acknowledge and agree that upon Company’s failure to comply
with the provisions of the Transaction Documents, Investor’s
damages would be uncertain and difficult (if not impossible) to
accurately estimate because of the parties’ inability to
predict future interest rates and future share prices,
Investor’s increased risk, and the uncertainty of the
availability of a suitable substitute investment opportunity for
Investor, among other reasons. Accordingly, any fees, charges, and
default interest due under the Note, the Warrant, and the other
Transaction Documents are intended by the parties to be, and shall
be deemed, liquidated damages (under Company’s and
Investor’s expectations that any such liquidated damages will
tack back to the Closing Date for purposes of determining the
holding period under Rule 144 under the 1933 Act). The parties
agree that such liquidated damages are a reasonable estimate of
Investor’s actual damages and not a penalty, and shall not be
deemed in any way to limit any other right or remedy Investor may
have hereunder, at law or in equity. The parties acknowledge and
agree that under the circumstances existing at the time this
Agreement is entered into, such liquidated damages are fair and
reasonable and are not penalties. All fees, charges, and default
interest provided for in the Transaction Documents are agreed to by
the parties to be based upon the obligations and the risks assumed
by the parties as of the Closing Date and are consistent with
investments of this type. The liquidated damages provisions of the
Transaction Documents shall not limit or preclude a party from
pursuing any other remedy available at law or in equity;
provided, however, that the
liquidated damages provided for in the Transaction Documents are
intended to be in lieu of actual damages.

 

 

8

 

 

9.18. Ownership
Limitation. Notwithstanding anything to the contrary
contained in this Agreement or the other Transaction Documents, if
at any time Investor would be issued shares of Common Stock under
any of the Transaction Documents, but such issuance would cause
Investor (together with its affiliates) to beneficially own a
number of shares exceeding the Maximum Percentage (as defined in
the Note), then Company must not issue to Investor the shares that
would cause Investor to exceed the Maximum Percentage. The shares
of Common Stock issuable to Investor that would cause the Maximum
Percentage to be exceeded are referred to herein as the
“Ownership Limitation
Shares”. Company shall reserve the Ownership
Limitation Shares for the exclusive benefit of Investor. From time
to time, Investor may notify Company in writing of the number of
the Ownership Limitation Shares that may be issued to Investor
without causing Investor to exceed the Maximum Percentage. Upon
receipt of such notice, Company shall be unconditionally obligated
to immediately issue such designated shares to Investor, with a
corresponding reduction in the number of the Ownership Limitation
Shares. For purposes of this Section, beneficial ownership of
Common Stock will be determined under Section 13(d) of the 1934
Act.

 

9.19. Attorneys’
Fees and Cost of Collection. In the event of any arbitration
or action at law or in equity to enforce or interpret the terms of
this Agreement or any of the other Transaction 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, deposition costs, and expenses
paid by such prevailing party in connection with arbitration or
litigation without reduction or apportionment based upon the
individual claims or defenses giving rise to the fees and expenses.
Nothing herein shall restrict or impair an arbitrator’s or a
court’s power to award fees and expenses for frivolous or bad
faith pleading. If (i) the Note or Warrant 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 Investor otherwise takes action
to collect amounts due under the Note or to enforce the provisions
of the Note or the Warrant, or (ii) there occurs any
bankruptcy, reorganization, receivership of Company or other
proceedings affecting Company’s creditors’ rights and
involving a claim under the Note or the Warrant; then Company shall
pay the costs incurred by Investor for such collection, enforcement
or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, without limitation,
attorneys’ fees, expenses, deposition costs, and
disbursements.

 

9.20. Waiver.
No waiver of any provision of this Agreement 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.

 

9.21. Waiver
of Jury Trial. EACH PARTY TO
THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY
HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER
TRANSACTION 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 SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH
PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

 

9

 

 

9.22. Time
is of the Essence. Time is
expressly made of the essence with respect to each and every provision of this
Agreement and the other Transaction Documents.

 

9.23. No
Changes; Signature Pages. Company, as well as the person
signing each Transaction Document on behalf of Company, represents
and warrants to Investor that it has not made any changes to this
Agreement or any other Transaction Document except those that have
been conspicuously disclosed to Investor in a “redline”
or similar draft of the applicable Transaction Document, which
clearly marks all changes Company has made to the applicable
Transaction Document. Moreover, the versions of the Transaction
Documents signed by Company are the same versions Investor
delivered to Company as being the “final” versions of
the Transaction Documents and Company represents and warrants that
it has not made any changes to such “final” versions of
the Transaction Documents and that the versions Company signed are
the same versions Investor delivered to it. In the event Company
has made any changes to any Transaction Document that are not
conspicuously disclosed to Investor in a “redline” or
similar draft of the applicable Transaction Document and that have
not been explicitly accepted and agreed upon by Investor, Company
acknowledges and agrees that any such changes shall not be
considered part of the final document set. Finally, and in
furtherance of the foregoing, Company agrees and authorizes
Investor to compile the “final” versions of the
Transaction Documents, which shall consist of Company’s
executed signature pages for all Transaction Documents being
applied to the last set of the Transaction Documents that Investor
delivered to Company, and Company agrees that such versions of the
Transaction Documents that have been collated by Investor shall be
deemed to be the final versions of the Transaction Documents for
all purposes.

 

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

 

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

 

10

 

IN
WITNESS WHEREOF, the undersigned Investor and Company have caused
this Agreement to be duly executed as of the date first above
written.

 

SUBSCRIPTION AMOUNT:

 

Principal Amount of
Note:

$775,000.00

 

Purchase
Price:

$700,000.00

 

 

INVESTOR:

 

Iliad Research and Trading, L.P.

 

By:
Iliad Management, LLC, its General Partner

 

By:

Fife
Trading, Inc., its Manager

 

By:
/s/ John Fife

      John
M. Fife, President

 

 

COMPANY:

 

Growlife, Inc.

 

By: 

/s/ Marco
Hegyi

 

Marco
Hegyi, Chief Executive Officer

 

 

 

11

 

 

ATTACHED
EXHIBITS:

 

Exhibit
A

Note

Exhibit
B

Warrant

Exhibit
C

Officer’s
Certificate

Exhibit
D

Security
Agreement

Exhibit
E

Irrevocable
Transfer Agent Instructions

Exhibit
F

Secretary’s Certificate

Exhibit
G

Share Issuance
Resolution

Exhibit
H

Arbitration
Provisions

Exhibit
I

Restricted
Investor List

 

 

12

 

EXHIBIT
H

 

ARBITRATION PROVISIONS

 

1.       

Dispute Resolution. For
purposes of this Exhibit
H, 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 Transaction 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)) or any
of the other Transaction Documents. For the avoidance of doubt,
Investor’s pursuit of an injunction or other Claim pursuant
to these Arbitration Provisions or a court will not later prevent
Investor under the doctrines of claim preclusion, issue preclusion,
res judicata or other similar legal doctrines from pursuing other
Claims in the future. The parties to this Agreement (the
“parties”)
hereby agree that the Claims may be arbitrated in one or more
Arbitrations pursuant to these Arbitration Provisions. The term
“Claims” specifically excludes a dispute over
Calculations and enforcement of Investor’s rights and
remedies against the personal property described in the Security
Agreement under the applicable provisions of the Uniform Commercial
Code. The parties hereby agree that the arbitration provisions set
forth in this Exhibit
H (“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) or any other Transaction 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, 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 Note,
“Default
Interest”) (with respect to monetary awards) at the
rate specified in the 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 9.13 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 9.13 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 9.13 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.

 

 

13

 

 

4.2         Selection
and Payment of Arbitrator.

 

(a)
Within ten (10) calendar days after the Service Date, Investor
shall select and submit to 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
Investor has submitted to Company the names of the Proposed
Arbitrators, Company must select, by written notice to Investor,
one (1) of the Proposed Arbitrators to act as the arbitrator for
the parties under these Arbitration Provisions. If Company fails to
select one of the Proposed Arbitrators in writing within such 5-day
period, then Investor may select the arbitrator from the Proposed
Arbitrators by providing written notice of such selection to
Company.

 

(b) If
Investor fails to submit to Company the Proposed Arbitrators within
ten (10) calendar days after the Service Date pursuant to
subparagraph (a) above, then Company may at any time prior to
Investor 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 Investor. Investor may then, within five (5)
calendar days after Company has submitted notice of its Proposed
Arbitrators to Investor, select, by written notice to Company, one
(1) of the Proposed Arbitrators to act as the arbitrator for the
parties under these Arbitration Provisions. If Investor fails to
select in writing and within such 5-day period one (1) of the three
(3) Proposed Arbitrators selected by Company, then Company may
select the arbitrator from its three (3) previously selected
Proposed Arbitrators by providing written notice of such selection
to Investor.

 

(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 and there is no successor thereto, 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.

 

 

14

 

 

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.

 

 

15

 

 

(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.

 

 

16

 

 

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.

 

 

17

 

 

(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.

 

 

18

 

 

(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 the 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.

 

[Remainder
of page intentionally left blank]

 

 

19

 

Exhibit
A

 

SECURED CONVERTIBLE PROMISSORY NOTE

 

Effective
Date: October 15, 2018  U.S. $775,000.00

 

FOR
VALUE RECEIVED, Growlife,
Inc., a Delaware corporation (“Borrower”), promises to pay to
Iliad Research and Trading,
L.P., a Utah limited partnership, or its successors or
assigns (“Lender”), $775,000.00 and any
interest, fees, charges, and late fees on the date that is nine (9)
months after the Purchase Price Date in accordance with the terms
set forth herein and to pay interest on the Outstanding Balance at
the rate of ten percent (10%) per annum from the Purchase Price
Date until the same is paid in full. This Secured Convertible
Promissory Note (this “Note”) is issued and made
effective as of October 15, 2018 (the “Effective Date”). This Note is
issued pursuant to that certain Securities Purchase Agreement dated
October 15, 2018, as the same may be amended from time to time, by
and between Borrower and Lender (the “Purchase Agreement”). All interest
calculations hereunder shall be computed on the basis of a 360-day
year comprised of twelve (12) thirty (30) day months,
shall compound daily and shall be payable in accordance with the
terms of this Note. Certain capitalized terms used herein are
defined in Attachment
1 attached hereto and incorporated herein by this
reference.

 

This
Note carries an OID of $70,000.00. In addition, Borrower agrees to pay
$5,000.00 to Lender to cover Lender’s legal fees, accounting
costs, due diligence, monitoring and other transaction costs
incurred in connection with the purchase and sale of this Note (the
“Transaction Expense
Amount”), all of which amount is included in the
initial principal balance of this Note. The purchase price for this
Note and the Warrant (as defined in the Purchase Agreement) shall
be $700,000.00 (the “Purchase
Price”), computed as follows: $775,000.00 original
principal balance, less the OID, less the Transaction Expense
Amount. The Purchase Price shall be payable by Lender by wire
transfer of immediately available funds.

 

10. Payment;
Prepayment.

 

10.1. Payment.
All payments owing hereunder shall be in lawful money of the United
States of America or Conversion Shares (as defined below), as
provided for herein, and delivered to Lender at the address or bank
account furnished to Borrower for that purpose. All payments shall
be applied first to (a) costs of collection, if any, then to (b)
fees and charges, if any, then to (c) accrued and unpaid interest,
and thereafter, to (d) principal.

 

10.2. Prepayment. Notwithstanding the
foregoing, so long as Borrower has not received a Conversion Notice
(as defined below) from Lender where the applicable Conversion
Shares have not yet been delivered and so long as no Event of
Default (as defined below) has occurred since the Effective Date
(whether declared by Lender or undeclared and regardless of whether
or not cured), then Borrower shall have the right, exercisable on
not less than five (5) Trading Days prior written notice to Lender
to prepay the Outstanding Balance of this Note, in full, in
accordance with this Section 1. Any notice of prepayment hereunder
(an “Optional Prepayment
Notice”) shall be delivered to Lender at its
registered address and shall state: (i) that Borrower is exercising
its right to prepay this Note, and (ii) the date of prepayment,
which shall be not less than five (5) Trading Days from the date of
the Optional Prepayment Notice. On the date fixed for prepayment
(the “Optional Prepayment
Date”), Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of Lender
as may be specified by Lender in writing to Borrower. If Borrower
exercises its right to prepay this Note, Borrower shall make
payment to Lender of an amount in cash equal to 125% multiplied by
the then Outstanding Balance of this Note (the “Optional Prepayment Amount”). In
the event Borrower delivers the Optional Prepayment Amount to
Lender prior to the Optional Prepayment Date or without delivering
an Optional Prepayment Notice to Lender as set forth herein without
Lender’s prior written consent, the Optional Prepayment
Amount shall not be deemed to have been paid to Lender until the
Optional Prepayment Date. Moreover, in such event the Optional
Prepayment Liquidated Damages Amount will automatically be added to
the Outstanding Balance of this Note on the day Borrower delivers
the Optional Prepayment Amount to Lender. In the event Borrower
delivers the Optional Prepayment Amount without an Optional
Prepayment Notice, then the Optional Prepayment Date will be deemed
to be the date that is five (5) Trading Days from the date that the
Optional Prepayment Amount was delivered to Lender and Lender shall
be entitled to exercise its conversion rights set forth herein
during such five (5) day period. In addition, if Borrower delivers
an Optional Prepayment Notice and fails to pay the Optional
Prepayment Amount due to Lender within two (2) Trading Days
following the Optional Prepayment Date, Borrower shall forever
forfeit its right to prepay this Note.

 

 

20

 

 

11. Security. This Note is secured
by that certain Security Agreement of even date herewith, as the
same may be amended from time to time (the “Security Agreement”), executed by
Borrower in favor of Lender encumbering all of Borrower’s
assets, as more specifically set forth in the Security Agreement,
all the terms and conditions of which are hereby incorporated into
and made a part of this Note.

 

12. Conversion.

 

12.1. Conversions.
Lender has the right at any time after the Purchase Price Date
until the Outstanding Balance has been paid in full, including
without limitation until any Optional Prepayment Date (even if
Lender has received an Optional Prepayment Notice), at its
election, to convert (each instance of conversion is referred to
herein as a “Conversion”) all or any part of
the Outstanding Balance into shares (“Conversion Shares”) of fully paid
and non-assessable common stock, $0.0001 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 (as defined
below). Conversion notices in the form attached hereto as
Exhibit A (each, a
“Conversion
Notice”) may be effectively delivered to Borrower by
any method of Lender’s choice (including but not limited to
facsimile, email, mail, overnight courier, or personal delivery),
and all Conversions shall be cashless and not require further
payment from Lender. Borrower shall deliver the Conversion Shares
from any Conversion to Lender in accordance with Section 9
below.

 

12.2. Conversion
Price. Subject to the adjustments set forth herein, the
conversion price (the “Conversion Price”) for each
Conversion shall be equal to 65% (the “Conversion Factor”) multiplied by
the average of the three (3) lowest VWAPs in the twenty (20)
Trading Days immediately preceding the applicable Conversion.
Additionally, if at any time after the Effective Date, the
Conversion Shares are not DTC Eligible, then the then-current
Conversion Factor will automatically be reduced by 5% for all
future Conversions. Finally, in addition to the Default Effect, if
any Major Default occurs after the Effective Date, the Conversion
Factor shall automatically be reduced for all future Conversions by
an additional 5% for each of the first three (3) Major Defaults
that occur after the Effective Date (for the avoidance of doubt,
each occurrence of any Major Default shall be deemed to be a
separate occurrence for purposes of the foregoing reductions in
Conversion Factor, even if the same Major Default occurs three (3)
separate times). For example, the first time the Conversion Shares
are not DTC Eligible, the Conversion Factor for future Conversions
thereafter will be reduced from 65% to 60% for purposes of this
example. If, thereafter, there are three (3) separate occurrences
of a Major Default pursuant to Section 5.1(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.

 

13. Redemption Right. At any time
after the date that is ninety (90) days from the Effective Date,
Lender shall have right to cause Borrower to redeem up to 66.67% of
the outstanding balance of this Note by delivering to Borrower a
written notice (“Redemption
Notice”) specifying the amount that Lender desires
Borrower to redeem (the “Redemption Amount”). Upon
Lender’s delivery of a Redemption Notice to Borrower,
Borrower will have five (5) Trading Days to pay the Redemption
Amount in cash (plus the 25% prepayment premium set forth in
Section 1.2 above) to Lender. Lender may deliver Redemption Notices
to Borrower in one or more increments, up to the total Redemption
Amount.

 

 

21

 

 

14. Defaults and
Remedies.

 

14.1. Defaults. The following are
events of default under this Note (each, an “Event of Default”):  Borrower fails
to pay any principal, interest, fees, charges, or any other amount
when due and payable hereunder; Borrower fails to deliver any
Conversion Shares in accordance with the terms hereof; 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; Borrower becomes insolvent or
generally fails to pay, or admits in writing its inability to pay,
its debts as they become due, subject to applicable grace periods,
if any; Borrower makes a general assignment for the benefit of
creditors; Borrower files a petition for relief under any
bankruptcy, insolvency or similar law (domestic or foreign); an
involuntary bankruptcy proceeding is commenced or filed against
Borrower; Borrower or any pledgor, trustor, or guarantor of this
Note defaults or otherwise fails to observe or perform any
covenant, obligation, condition or agreement of Borrower or such
pledgor, trustor, or guarantor contained herein or in any other
Transaction Document (as defined in the Purchase Agreement), other
than those specifically set forth in this Section 5.1 and Section 4
of the Purchase Agreement; any representation, warranty or other
statement made or furnished by or on behalf of Borrower or any
pledgor, trustor, or guarantor of this Note to Lender herein, in
any Transaction Document, or otherwise in connection with the
issuance of this Note is false, incorrect, incomplete or misleading
in any material respect when made or furnished; the occurrence of a
Fundamental Transaction without Lender’s prior written
consent; 
 Borrower fails to maintain the Share Reserve as
required under the Purchase Agreement; Borrower effectuates a
reverse split of its Common Stock without twenty (20) Trading Days
prior written notice to Lender; any money judgment, writ or similar
process is entered or filed against Borrower or any subsidiary of
Borrower or any of its property or other assets for more than
$100,000.00, and shall remain unvacated, unbonded or unstayed for a
period of twenty (20) calendar days unless otherwise consented to
by Lender; Borrower’s Common Stock fails to be DTC Eligible;

Borrower fails to observe or perform any covenant set forth in
Section 4 of the Purchase Agreement (other than the covenant with
respect to Unapproved Variable Security Issuances);  Borrower makes
an Unapproved Variable Security Issuance; or Borrower, any
affiliate of Borrower, or any pledgor, trustor, or guarantor of
this Note breaches any covenant or other term or condition
contained in any Other Agreements.

 

14.2. Remedies. At any time and from
time to time after Lender becomes aware of the occurrence of any
Event of Default, Lender may accelerate this Note by written notice
to Borrower, with the Outstanding Balance becoming immediately due
and payable in cash at the Mandatory Default Amount.
Notwithstanding the foregoing, at any time following the occurrence
of any Event of Default, Lender may, at its option, elect to
increase the Outstanding Balance by applying the Default Effect
(subject to the limitation set forth below) via written notice to
Borrower without accelerating the Outstanding Balance, in which
event the Outstanding Balance shall be increased as of the date of
the occurrence of the applicable Event of Default pursuant to the
Default Effect, but the Outstanding Balance shall not be
immediately due and payable unless so declared by Lender (for the
avoidance of doubt, if Lender elects to apply the Default Effect
pursuant to this sentence, it shall reserve the right to declare
the Outstanding Balance immediately due and payable at any time and
no such election by Lender shall be deemed to be a waiver of its
right to declare the Outstanding Balance immediately due and
payable as set forth herein unless otherwise agreed to by Lender in
writing). Notwithstanding the foregoing, upon the occurrence of any
Event of Default described in clauses (c), (d), (e), (f) or (g) of
Section 5.1, the Outstanding Balance as of the date of acceleration
shall become immediately and automatically due and payable in cash
at the Mandatory Default Amount, without any written notice
required by Lender. At any time following the occurrence of any
Event of Default, upon written notice given by Lender to Borrower,
interest shall accrue on the Outstanding Balance beginning on the
date the applicable Event of Default occurred at an interest rate
equal to the lesser of 22% per annum or the maximum rate permitted
under applicable law (“Default Interest”). For the
avoidance of doubt, Lender may continue making Conversions at any
time following an Event of Default until such time as the
Outstanding Balance is paid in full. Borrower further acknowledges
and agrees that Lender may continue making Conversions following
the entry of any judgment or arbitration award in favor of Lender
until such time that the entire judgment amount or arbitration
award is paid in full. Borrower agrees that any judgment or
arbitration award will, by its terms, be made convertible into
Common Stock. Any Conversions made following a judgment or
arbitration award shall be made pursuant to the following formula:
the amount of the judgment or arbitration award being converted
divided by 80% of the lowest Closing Bid Price in the ten (10)
Trading Days immediately preceding the date of Conversion. In such
event, Borrower and Lender agree that it is their expectation that
any such judgment amount or arbitration award that is converted
will tack back to the Purchase Price Date for purposes of
determining the holding period under Rule 144. Borrower and Lender
agree and stipulate that any judgment or arbitration award entered
against Borrower shall be reduced by $1,000.00 and such $1,000.00
shall become the new Outstanding Balance of this Note and this Note
shall expressly survive such judgment or arbitration award.
Additionally, following the occurrence of any Event of Default,
Borrower may, at its option, pay any Conversion in cash instead of
Conversion Shares by paying to Lender on or before the applicable
Delivery Date (as defined below) a cash amount equal to the number
of Conversion Shares set forth in the applicable Conversion Notice
multiplied by the highest intra-day trading price of the Common
Stock that occurs during the period beginning on the date the
applicable Event of Default occurred and ending on the date of the
applicable Conversion Notice. In connection with acceleration
described herein, Lender need not provide, and Borrower hereby
waives, any presentment, demand, protest or other notice of any
kind, and Lender may immediately and without expiration of any
grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable
law. Such acceleration may be rescinded and annulled by Lender at
any time prior to payment hereunder and Lender shall have all
rights as a holder of the Note until such time, if any, as Lender
receives full payment pursuant to this Section 5.2. 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 in one or more
arbitrations 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 Note as
required pursuant to the terms hereof.

 

 

22

 

 

15. 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.

 

16. 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.

 

17. Adjustment of Conversion Price upon
Subdivision or Combination of Common Stock. Without limiting
any provision hereof, if Borrower at any time on or after the
Effective Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. Without limiting any
provision hereof, if Borrower at any time on or after the Effective
Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased. Any adjustment pursuant to this Section 8 shall become
effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this
Section 8 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.

 

18. Method of Conversion Share
Delivery. On or before the close of business on the third
(3rd)
Trading Day following each date of delivery of a Conversion Notice
(the “Delivery
Date”), Borrower shall deliver or cause to be
delivered to Lender or its broker (as designated in the Conversion
Notice), via reputable overnight courier, a certificate or
certificates representing the aggregate number of Conversion Shares
to which Lender shall be entitled, registered in the name of Lender
or its designee. For the avoidance of doubt, Borrower has not met
its obligation to deliver Conversion Shares by the Delivery Date
unless Lender or its broker, as applicable, has actually received
the certificate representing the applicable Conversion Shares no
later than the close of business on the relevant Delivery Date
pursuant to the terms set forth above. Moreover, and
notwithstanding anything to the contrary herein or in any other
Transaction Document, in the event Borrower or its transfer agent
refuses to deliver any Conversion Shares to Lender on grounds that
such issuance is in violation of Rule 144 under the Securities Act
of 1933, as amended (“Rule
144”), Borrower shall deliver or cause its transfer
agent to deliver the applicable Conversion Shares to Lender with a
restricted securities legend, but otherwise in accordance with the
provisions of this Section 9. 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.

 

19. Conversion Delays. If Borrower
fails to deliver Conversion Shares in accordance with the timeframe
stated in Section 9, Lender, at any time prior to selling all of
those Conversion Shares, may rescind in whole or in part that
particular Conversion attributable to the unsold Conversion Shares,
with a corresponding increase to the Outstanding Balance (any
returned amount will tack back to the Purchase Price Date for
purposes of determining the holding period under Rule 144). In
addition, for each Conversion, in the event that Conversion Shares
are not delivered by the fourth (4th) 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 (3rd) 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).

 

 

23

 

 

20. Approved Variable Security
Issuance. The outstanding balance of this Note will
automatically be increased by five percent (5%) for each Approved
Variable Security Issuance made by Borrower (without the need for
Lender to provide any notice to Borrower of such increase), which
increase will be effective as of the date of each applicable
Approved Variable Security Issuance.

 

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

 

22. 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.

 

23. 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.

 

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

 

 

24

 

 

25. Resolution of
Disputes.

 

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

 

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

 

26. 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.

 

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

 

28. 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.

 

29. 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.

 

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

 

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

 

32. 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.

 

33. 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.

 

 

25

 

 

34. 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.

 

35. 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, Borrower 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]

 

26

 

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

 

BORROWER:

 

Growlife, Inc.

 

 

By:
/s/ Marco Hegyi

Name:
Marco Hegyi

Title:
CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Iliad Research and Trading, L.P.

 

By: Iliad Management, LLC, its General Partner

 

By:
Fife Trading, Inc., its Manager

 

 

By:
/s/ John Fife

      John
M. Fife, President

 

 

 

27

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “Approved
Variable Security Issuance” means a Variable Security Issuance (as
defined in the Purchase Agreement) for which Borrower received
Lender’s written consent prior to the applicable
issuance.

 

A2.  “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).

 

A3. “Closing
Bid Price” and
“Closing Trade
Price” means the last
closing bid price and last closing trade price, respectively, for
the Common Stock on its principal market, as reported by Bloomberg,
or, if its principal market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing
trade price (as the case may be) then the last bid price or last
trade price, respectively, of the Common Stock prior to
4:00:00 p.m., New York time, as reported by Bloomberg, or, if
its principal market is not the principal securities exchange or
trading market for the Common Stock, the last closing bid price or
last trade price, respectively, of the Common Stock on the
principal securities exchange or trading market where the Common
Stock is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the last closing bid price or last trade
price, respectively, of the Common Stock in the over-the-counter
market on the electronic bulletin board for the Common Stock as
reported by Bloomberg, or, if no closing bid price or last trade
price, respectively, is reported for the Common Stock by Bloomberg,
the average of the bid prices, or the ask prices, respectively, of
any market makers for the Common Stock as reported by OTC Markets
Group, Inc., and any successor thereto. If the Closing Bid Price or
the Closing Trade Price cannot be calculated for the Common Stock
on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Trade Price (as the case may be) of the Common
Stock on such date shall be the fair market value as mutually
determined by Lender and Borrower. If Lender and Borrower are
unable to agree upon the fair market value of the Common Stock,
then such dispute shall be resolved in accordance with the
procedures in Section 16.2. All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar
transaction during such period.

 

A4. “Conversion
Share Value” means the
product of the number of Conversion Shares deliverable pursuant to
any Conversion multiplied by the Closing Trade Price of the Common
Stock on the Delivery Date for such Conversion.

 

A5. “Default
Effect” means multiplying
the Outstanding Balance as of the date the applicable Event of
Default occurred by (a) fifteen percent (15%) for each occurrence
of any Major Default, (b) ten percent (10%) for each occurrence of
an Unapproved Variable Security Issuance Default, or (c) five
percent (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 aggregate amount of the Default Effect for all Major Defaults
and Minor Defaults shall not exceed twenty-five percent (25%); and
provided further that the Default Effect shall not apply to any
Event of Default pursuant to Section 4.1(b) hereof. There shall be
no limit on the number of times the Default Effect may be applied
with respect to Unapproved Variable Security Issuance
Defaults.

 

A6. “DTC”
means the Depository Trust Company or any successor
thereto.

 

A7. “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.

 

A8. “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.

 

 

28

 

 

A9. “Major
Default” means any Event
of Default occurring under Sections 5.1(a),
5.1(k), or 5.1(o) of this
Note.

 

A10. “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.

 

A11. “Market
Capitalization” means a
number equal to (a) the average VWAP of the Common Stock for the
immediately preceding fifteen (15) Trading Days, multiplied by (b)
the aggregate number of outstanding shares of Common Stock as
reported on Borrower’s most recently filed Form 10-Q or Form
10-K.

 

A12. “Minor
Default” means any Event
of Default that is not a Major Default or an Unapproved Variable
Security Issuance Default.

 

A13. “OID”
means an original issue discount.

 

A14. “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.

 

A15. “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.

 

A16. “Outstanding
Balance” means as of any
date of determination, the Purchase Price, as reduced or increased,
as the case may be, pursuant to the terms hereof for payment,
Conversion, offset, or otherwise, plus the OID, the Transaction
Expense Amount, accrued but unpaid interest, collection and
enforcements costs (including attorneys’ fees) incurred by
Lender, transfer, stamp, issuance and similar taxes and fees
related to Conversions, and any other fees or charges (including
without limitation Conversion Delay Late Fees) incurred under this
Note.

 

A17. “Par
Value” means the par
value of the Common Stock on any relevant date of determination.
The Par Value as of the Effective Date is
$0.0001.

 

A18. “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).

 

A19. “Purchase
Price Date” means the
date the Purchase Price is delivered by Lender to
Borrower.

 

A20. “Trading
Day” means any day on
which the New York Stock Exchange is open for
trading.

 

A21. “Unapproved
Variable Security Issuance” means a Variable Security Issuance for
which Borrower did not receive Lender’s written consent prior
to the applicable issuance.

 

A22. “Unapproved
Variable Security Issuance Default” means an Event of Default occurring under
Section 5.1(p)
of this Note.

 

A23. “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.

 

[Remainder of page intentionally left blank]

 

 

29

 

EXHIBIT A

 

Iliad
Research and Trading, 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 Secured Convertible Promissory Note made by Borrower in
favor of Lender on October 15, 2018 (the “Note”), that Lender elects to
convert the portion of the Note balance set forth below into fully
paid and non-assessable shares of Common Stock of Borrower as of
the date of conversion specified below. Said conversion shall be
based on the Conversion Price set forth below. In the event of a
conflict between this Conversion Notice and the Note, the Note
shall govern, or, in the alternative, at the election of Lender in
its sole discretion, Lender may provide a new form of Conversion
Notice to conform to the Note. Capitalized terms used in this
notice without definition shall have the meanings given to them in
the Note.

 

A. 

Date of
Conversion: 

____________

B. 

Conversion
#: 

____________

C. 

Conversion
Amount: 

____________

D. 

Conversion Price:
_______________

E. 

Conversion Shares:
_______________ (C divided by D)

F. 

Remaining
Outstanding Balance of Note: ____________*

 

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

 

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

 

Name:                       

_____________________________________

Address:                       

_____________________________________

_____________________________________

 

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

 

[Signature Page Follows]

 

 

30

 

 

 

Sincerely,

 

Lender:

 

Iliad Research and Trading, L.P.

 

By: Iliad Management, LLC, its General Partner

 

By:
Fife Trading, Inc., its Manager

 

 

By:                                                      

      John
M. Fife, President

 

 

 

31

 

EXHIBIT B

 

Iliad
Research and Trading, 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 Secured Convertible Promissory Note made by Borrower in
favor of Lender on October 15, 2018 (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)

G. 

Remaining
Outstanding Balance of Note: ____________*

 

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

 

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

 

Name:                       

_____________________________________

Address:                       

_____________________________________

_____________________________________

 

To the
extent the Conversion Shares are not DTC Eligible, please deliver,
via reputable overnight courier, a certificate representing the
non-DTC Eligible 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.

 

[Signature Page Follows]

 

 

32

 

 

 

Sincerely,

 

Lender:

 

Iliad Research and Trading, L.P.

 

By: Iliad Management, LLC, its General Partner

 

By:
Fife Trading, Inc., its Manager

 

 

By:                                                      

      John
M. Fife, President

 

 

33

 

Exhibit
B

 

THIS
WARRANT AND THE COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE COMMON STOCK ISSUABLE HEREUNDER MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR ANY SHARES
ISSUABLE HEREUNDER UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
GROWLIFE, INC. OR ITS TRANSFER AGENT THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

GROWLIFE,
INC.

 

WARRANT
TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable
consideration as set forth in the Purchase Agreement (as defined
below), including without limitation the Purchase Price (as defined
in the Purchase Agreement), the receipt and sufficiency of which
are hereby acknowledged by Growlife, Inc., a Delaware
corporation (“Company”); Iliad Research and Trading, L.P.,
a Utah limited partnership, its successors and/or registered
assigns (“Investor”), is hereby granted the
right to purchase at any time on or after the Issue Date (as
defined below) until the date which is the last calendar day of the
month in which the fifth anniversary of the Issue Date occurs (the
“Expiration
Date”), a number of fully paid and non-assessable
shares (the “Warrant
Shares”) of Company’s common stock, par value
$0.0001 per share (the “Common Stock”), equal to
$387,500.00 divided by the Market Price (as of the Issue Date), as
such number may be adjusted from time to time pursuant to the terms
and conditions of this Warrant to Purchase Shares of Common Stock
(this “Warrant”).

 

This
Warrant is being issued pursuant to the terms of that certain
Securities Purchase Agreement dated October 15, 2018, to which
Company and Investor are parties (as the same may be amended from
time to time, the “Purchase
Agreement”). Certain capitalized terms used herein are
defined in Attachment
1 attached hereto and incorporated herein by this reference.
Moreover, to the extent any defined terms herein are defined in any
other Transaction Document (as so noted herein), such defined term
shall remain applicable in this Warrant even if the other
Transaction Document has been released, satisfied, or is otherwise
cancelled.

 

This
Warrant was issued to Investor on October 15, 2018 (the
“Issue
Date”).

 

2. Exercise of
Warrant.

 

2.1. General.

 

This
Warrant is exercisable in whole or in part at any time and from
time to time commencing on the Issue Date and ending on the
Expiration Date. Such exercise shall be effectuated by submitting
to Company (either by delivery to Company or by email or facsimile
transmission) a completed and signed Notice of Exercise
substantially in the form attached to this Warrant as Exhibit A (the
“Notice of
Exercise”). The date a Notice of Exercise is either
faxed, emailed or delivered to Company shall be the
“Exercise Date,”
provided that, if such exercise represents the full exercise of the
outstanding balance of this Warrant, Investor shall tender this
Warrant to Company within five (5) Trading Days thereafter, but
only if the Delivery Shares to be delivered pursuant to the Notice
of Exercise have been delivered to Investor as of such date. The
Notice of Exercise shall be executed by Investor and shall indicate
(i) the number of Delivery Shares to be issued pursuant to such
exercise, and (ii) if applicable (as provided below), whether the
exercise is a cashless exercise.

 

 

34

 

 

Notwithstanding any
other provision contained herein or in any other Transaction
Document to the contrary, at any time prior to the Expiration Date,
Investor may elect a “cashless” exercise of this
Warrant for any Warrant Shares whereby Investor shall be entitled
to receive a number of shares of Common Stock equal to (i) the
excess of the Current Market Value over the aggregate Exercise
Price of the Exercise Shares, divided by (ii) the Adjusted
Price.

 

If the
Notice of Exercise form elects a “cash” exercise, the
Exercise Price per share of Common Stock for the Delivery Shares
shall be payable, at the election of Investor, in cash or by
certified or official bank check or by wire transfer in accordance
with instructions provided by Company at the request of
Investor.

 

Upon the appropriate payment to
Company, if any, of the Exercise Price for the Delivery Shares,
Company shall promptly, but in no case later than the date that is
three (3) Trading Days following the date the Exercise Price is
paid to Company (or with respect to a “cashless
exercise,” the date that is three (3) Trading Days following
the Exercise Date) (the “Delivery Date”), provided that the
Common Stock is then DTC Eligible (as defined in the Note), deliver
or cause Company’s Transfer Agent (as defined in the Note) to
deliver to Investor or its broker (as designated in the Notice of
Exercise), via reputable overnight courier, a certificate,
registered in the name of Investor or its designee, representing
DTC Eligible Common Stock equal to the applicable number of
Delivery Shares. If the Common Stock is not DTC Eligible at such
time, such shall constitute a breach of this Warrant, and Company
shall instead, on or before the applicable date set forth above in
this subsection, issue and deliver to Investor or its broker (as
designated in the Notice of Exercise), via reputable overnight
courier, a certificate, registered in the name of Investor or its
designee, representing the applicable number of Delivery Shares.
For the avoidance of doubt, Company has not met its obligation to
deliver Delivery Shares within the required timeframe set forth
above unless Investor or its broker, as applicable, has actually
received the certificate representing the applicable Delivery
Shares no later than the close of business on the latest possible
delivery date pursuant to the terms set forth above. Moreover, and
notwithstanding anything to the contrary herein or in any other
Transaction Document, in the event Company or its Transfer Agent
refuses to deliver any Delivery Shares to Investor on grounds that
such issuance is in violation of Rule 144 under the 1933 Act (as
defined below) (“Rule
144”), Company shall deliver or cause its Transfer
Agent to deliver the applicable Delivery Shares to Investor with a
restricted securities legend, but otherwise in accordance with the
provisions of this Section 2.1(d). In conjunction therewith,
Company will also deliver to Investor a written opinion from its
counsel or its Transfer Agent’s counsel opining as to why the
issuance of the applicable Delivery Shares violates Rule
144.

 

If
Delivery Shares are delivered later than as required under
subsection (d) immediately above, Company agrees to pay, in
addition to all other remedies available to Investor in the
Transaction Documents, a late charge equal to the greater of (i)
$500.00 and (ii) 2% of the product of (1) the number of shares of
Common Stock not issued to Investor on a timely basis and to which
Investor is entitled multiplied by (2) the VWAP of the Common
Stock on the Trading Day immediately preceding the last possible
date which Company could have issued such shares of Common Stock to
Investor without violating this Warrant, rounded to the nearest
multiple of $100.00 (such resulting amount, the “Warrant Share Value”) (but in any
event the cumulative amount of such late fees for each exercise
shall not exceed 200% of the Warrant Share Value), per Trading Day
until such Warrant Shares are delivered (the “Late Fees”). Company acknowledges
and agrees that the failure to timely deliver Delivery Shares
hereunder is a material breach of this Warrant and that the Late
Fees are properly charged as liquidated damages to compensate
Investor for such breach. Company shall pay any Late Fees incurred
under this subsection in immediately available funds upon demand;
provided, however, that, so
long as the Note is outstanding, at the option of Investor, such
amount owed may be added to the principal amount of the Note.
Furthermore, in the event that Company fails for any reason to
effect delivery of the Delivery Shares as required under subsection
(d) immediately above, Investor may revoke all or part of the
relevant Warrant exercise by delivery of a notice to such effect to
Company, whereupon Company and Investor shall each be restored to
their respective positions immediately prior to the exercise of the
relevant portion of this Warrant, except that the Late Fees
described above shall be payable through the date notice of
revocation or rescission is given to Company. Finally, in the event
Company fails to deliver any Delivery Shares to Investor for a
period of ninety (90) days from the Delivery Date, Investor may
elect, in its sole discretion, to stop the accumulation of the Late
Fees as of such date and require Company to pay to Investor a cash
amount equal to (i) the total amount of all Late Fees that have
accumulated prior to the date of Investor’s election, plus
(ii) the product of the number of Delivery Shares deliverable to
Investor on such date if it were to exercise this Warrant with
respect to the remaining number of Exercise Shares as of such date
multiplied by the Closing Trade Price of the Common Stock on the
Delivery Date (the “Cash
Settlement Amount”). At such time as Investor makes an
election to require Company to pay to it the Cash Settlement
Amount, such obligation of Company shall be a valid and binding
obligation of Company and shall for all purposes be deemed to be a
debt obligation of Company owed to Investor as of the date it makes
such election. Upon Company’s payment of the Cash Settlement
Amount to Investor, this Warrant shall be deemed to have been
satisfied. In addition, and for the avoidance of doubt, even if
Company could not deliver the number of Delivery Shares deliverable
to Investor if it were to exercise this Warrant with respect to the
remaining number of Exercise Shares on the date of repayment due to
the provisions of Section 2.2, the provisions of Section 2.2 will
not apply with respect to Company’s payment of the Cash
Settlement Amount.

 

 

35

 

 

Investor shall be
deemed to be the holder of the Delivery Shares (not including any
Ownership Limitation Shares (as defined below)) issuable to it in
accordance with the provisions of this Section 2.1 on the Exercise
Date.

 

2.2. Ownership Limitation.
Notwithstanding anything to the contrary contained in this Warrant
or the other Transaction Documents, if at any time Investor shall
or would be issued shares of Common Stock, but such issuance would
cause Investor (together with its affiliates) to own a number of
shares exceeding 4.99% of the number of shares of Common Stock
outstanding on such date (the “Maximum Percentage”), Company must
not issue to Investor shares of Common Stock which would exceed the
Maximum Percentage. The shares of Common Stock issuable to Investor
that would cause the Maximum Percentage to be exceeded are referred
to herein as the “Ownership Limitation Shares”. In such event, Company
shall reserve the Ownership Limitation Shares for the exclusive
benefit of Investor. From time to time, Investor may notify Company
in writing of the number of the Ownership Limitation Shares that
may be issued to Investor without causing Investor to exceed the
Maximum Percentage. Upon receipt of such notice, Company shall be
unconditionally obligated to immediately issue such designated
shares to Investor, with a corresponding reduction in the number of
the Ownership Limitation Shares. Notwithstanding the foregoing, 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 change
to “9.99%” shall be permanent. By written notice to
Company, Investor 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
Investor.

 

3. Mutilation or Loss of Warrant.
Upon receipt by Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) receipt of reasonably satisfactory
indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, Company will execute and deliver to
Investor a new Warrant of like tenor and date and any such lost,
stolen, destroyed or mutilated Warrant shall thereupon become
void.

 

4. Rights of Investor. Investor
shall not, by virtue of this Warrant alone, be entitled to any
rights of a stockholder in Company, either at law or in equity, and
the rights of Investor with respect to or arising under this
Warrant are limited to those expressed in this Warrant and are not
enforceable against Company except to the extent set forth
herein.

 

5. Protection Against Dilution and Other
Adjustments.

 

5.1. Capital Adjustments. If Company
shall at any time prior to the expiration of this Warrant subdivide
the Common Stock, by split-up or stock split, or otherwise, or
combine its Common Stock, or issue additional shares of its Common
Stock as a dividend, the number of Warrant Shares issuable upon the
exercise of this Warrant shall forthwith be automatically increased
proportionately in the case of a subdivision, split or stock
dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the
Exercise Price and other applicable amounts, but the aggregate
purchase price payable for the total number of Warrant Shares
purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 5.1 shall become effective
automatically at the close of business on the date the subdivision
or combination becomes effective, or as of the record date of such
dividend, or in the event that no record date is fixed, upon the
making of such dividend.

 

 

 

36

 

 

5.2. Reclassification, Reorganization and
Consolidation. In case of any reclassification, capital
reorganization, or change in the capital stock of Company (other
than as a result of a subdivision, combination, or stock dividend
provided for in Section 5.1 above), then Company shall make
appropriate provision so that Investor shall have the right at any
time prior to the expiration of this Warrant to purchase, at a
total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other
securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same
number of shares of Common Stock as were purchasable by Investor
immediately prior to such reclassification, reorganization, or
change. In any such case appropriate provisions shall be made with
respect to the rights and interest of Investor so that the
provisions hereof shall thereafter be applicable with respect to
any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to
the purchase price per Warrant Share payable hereunder, provided
the aggregate purchase price shall remain the same.

 

5.3. Subsequent Equity Sales. If
Company or any subsidiary thereof, as applicable, at any time and
from time to time while this Warrant is outstanding, shall sell or
grant any option to purchase, or sell or grant any right to
reprice, or otherwise dispose of, sell or issue (or announce any
offer, sale, grant or any option to purchase or other disposition
of) any Common Stock (including any Common Stock issued under the
Note, whether upon any type of conversion or any Deemed Issuance),
debt, warrants, options, preferred shares or other instruments or
securities which are convertible into or exercisable for shares of
Common Stock (together herein referred to as “Equity Securities”), at an
effective price per share less than the Exercise Price (such lower
price, the “Base Share
Price”, and any such issuance, a “Dilutive Issuance”) (if the holder
of the Common Stock or 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 issuance, be entitled to receive
shares of Common Stock at an effective price per share that is less
than the Exercise Price, such issuance shall be deemed to have
occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then (a) the Exercise Price shall be reduced
and only reduced to equal the Base Share Price, and (b) the number
of Warrant Shares issuable upon the exercise of this Warrant shall
be increased to an amount equal to the number of Warrant Shares
Investor could purchase hereunder for an aggregate Exercise Price,
as reduced pursuant to subsection (a) above, equal to the aggregate
Exercise Price payable immediately prior to such reduction in
Exercise Price, provided that the increase in the number of
Exercise Shares issuable under this Warrant made pursuant to this
Section 5.3 shall not at any time exceed a number equal to five (5)
times the number of Exercise Shares issuable under this Warrant as
of the Issue Date (for the avoidance of doubt, the foregoing cap on
the number of Exercise Shares issuable hereunder shall only apply
to adjustments made pursuant to this Section 5.3 and shall not
apply to adjustments made pursuant to Sections 5.1, 5.2 or any
other section of this Warrant). Such adjustments shall be made
whenever such Common Stock or Equity Securities are issued. Company
shall notify Investor, in writing, no later than the Trading Day
following the issuance of any Common Stock or Equity Securities
subject to this Section 5.3, indicating therein the applicable
issuance price, or applicable reset price, exchange price,
conversion price, or other pricing terms (such notice, the
“Dilutive Issuance Notice”). Dilutive
Issuance Notices shall be in the form set forth in Section 6 below.
For purposes of clarification, whether or not Company provides a
Dilutive Issuance Notice pursuant to this Section 5.3, upon the
occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance, Investor is entitled to receive the increased
number of Warrant Shares provided for in subsection (b) above at an
Exercise Price equal to the Base Share Price regardless of whether
Investor accurately refers to the Base Share Price in the Notice of
Exercise. Additionally, following the occurrence of a Dilutive
Issuance, all references in this Warrant to “Warrant
Shares” shall be a reference to the Warrant Shares as
increased pursuant to subsection (b) above, and all references in
this Warrant to “Exercise Price” shall be a reference
to the Exercise Price as reduced pursuant to subsection (a) above,
as the same may occur from time to time hereunder.

 

 

37

 

 

5.4. Exceptions
to Adjustment. Notwithstanding the provisions of Section
5.3, no adjustment to the Exercise Price shall be effected as a
result of an Excepted Issuance.

 

6. Certificate as to Adjustments.
In each case of any adjustment or readjustment in the number or
kind of shares issuable on the exercise of this Warrant, or in the
Exercise Price, pursuant to the terms hereof, Company at its
expense will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in
accordance with the terms of this Warrant and prepare a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or
receivable by Company for any additional shares of Common Stock
issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Exercise Price and the number of shares of
Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. Nothing in this
Section 6 shall be deemed to limit any other provision contained
herein.

 

7. Transfer to Comply with the Securities
Act. This Warrant and the Warrant Shares have not been
registered under the Securities Act of 1933, as amended (the
“1933 Act”).
Neither this Warrant nor the Warrant Shares may be sold,
transferred, pledged or hypothecated without (a) an effective
registration statement under the 1933 Act relating to such security
or (b) an opinion of counsel reasonably satisfactory to Company
that registration is not required under the 1933 Act; provided, however, that the foregoing
restrictions on transfer shall not apply to the transfer of the
Warrant to an affiliate of Investor. Until such time as
registration has occurred under the 1933 Act, each certificate for
this Warrant and any Warrant Shares shall contain a legend, in form
and substance satisfactory to counsel for Company, setting forth
the restrictions on transfer contained in this Section 7;
provided, however, that
Company acknowledges and agrees that any such legend shall be
removed from all certificates for DTC Eligible Common Stock
delivered hereunder as such Common Stock is cleared and converted
into electronic shares by the DTC, and nothing contained herein
shall be interpreted to the contrary. Upon receipt of a duly
executed assignment of this Warrant, Company shall register the
transferee thereon as the new holder on the books and records of
Company and such transferee shall be deemed a “registered
holder” or “registered assign” for all purposes
hereunder, and shall have all the rights of Investor under this
Warrant. Until this Warrant is transferred on the books of Company,
Company may treat Investor as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.

 

8. Notices. Any notice required or
permitted hereunder shall be given in the manner provided in the
subsection titled “Notices” in the Purchase Agreement,
the terms of which are incorporated herein by
reference.

 

9. Supplements and Amendments; Whole
Agreement. This Warrant may be amended or supplemented only
by an instrument in writing signed by the parties hereto. This
Warrant, together with the Purchase Agreement, contains the full
understanding of the parties hereto with respect to the subject
matter hereof and thereof and there are no representations,
warranties, agreements or understandings with respect to the
subject matter hereof and thereof other than as expressly contained
herein and therein.

 

10. Purchase Agreement; Arbitration of
Disputes; Calculation Disputes. This Warrant is subject to
the terms, conditions and general provisions of the Purchase
Agreement, including without limitation the Arbitration Provisions
(as defined in the Purchase Agreement) set forth as an exhibit to
the Purchase Agreement. In addition, notwithstanding the
Arbitration Provisions, in the case of
a dispute as to any Calculation (as defined in the Purchase
Agreement), such dispute will be resolved in the manner set forth
in the Purchase Agreement.

 

 

38

 

 

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

 

12. Waiver of Jury
Trial. COMPANY 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 WARRANT 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, COMPANY ACKNOWLEDGES THAT IT IS
KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY
JURY.

 

13. Remedies. The remedies at law
of Investor under this Warrant in the event of any default or
threatened default by Company in the performance of or compliance
with any of the terms of this Warrant are not and will not be
adequate and, without limiting any other remedies available to
Investor in the Transaction Documents, at law or equity, to the
fullest extent permitted by law, such terms may be specifically
enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of
the terms hereof or otherwise without the obligation to post a
bond.

 

14. Liquidated Damages. Company and
Investor agree that in the event Company fails to comply with any
of the terms or provisions of this Warrant, Investor’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, Investor and
Company agree that any fees or other charges assessed under this
Warrant are not penalties but instead are intended by the parties
to be, and shall be deemed, liquidated damages (under
Investor’s and Company’s expectations that any such
liquidated damages will tack back to the Issue Date for purposes of
determining the holding period under Rule 144.

 

15. Counterparts. This Warrant may
be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the
same instrument. Signatures delivered via facsimile or email shall
be considered original signatures for all purposes
hereof.

 

16. Attorneys’ Fees. In the
event of any arbitration, litigation or dispute arising from this
Warrant, 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 said prevailing party in connection with
arbitration or litigation without reduction or apportionment based
upon the individual claims or defenses giving rise to the fees
and expenses. Nothing herein shall restrict or impair an
arbitrator’s or a court’s power to award fees and
expenses for frivolous or bad faith pleading.

 

17. Severability. Whenever
possible, each provision of this Warrant shall be interpreted in
such a manner as to be effective and valid under applicable law,
but if any provision of this Warrant 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 Warrant or
the validity or enforceability of this Warrant in any other
jurisdiction.

 

 

39

 

 

18. Time is of the Essence. Time is
expressly made of the essence with respect to each and every
provision of this Warrant.

 

19. Descriptive Headings.
Descriptive headings of the sections of this Warrant are inserted
for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.

 

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

 

40

 

IN
WITNESS WHEREOF, Company has caused this Warrant to be duly
executed by an officer thereunto duly authorized as of the Issue
Date.

 

COMPANY:

 

Growlife, Inc.

 

 

By:            

/s/ Marco
Hegyi

 

Printed
Name: Marco Hegyi

 

Title:
CEO

 

 

41

 

ATTACHMENT 1

DEFINITIONS

 

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

 

“Adjusted
Price” means the lower of
(i) the Exercise Price (as such Exercise Price may be adjusted from
time to time pursuant to the terms of this Warrant), and (ii) the
Market Price.

 

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

 

“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 Investor and reasonably satisfactory to
Company).

 

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

 

“Conversion Factor” means 65%,
subject to the following adjustments. If at any time after the
Issue Date, the Delivery Shares are not DTC Eligible, then the
then-current Conversion Factor will automatically be permanently
reduced by 5%. For example, the first time the Delivery Shares are
not DTC Eligible, the Conversion Factor for future exercises
thereafter will be reduced from 65% to 60% for purposes of this
example.

 

“Current Market
Value” means an amount
equal to the Trade Price multiplied by the number of Exercise
Shares specified in the applicable Notice of
Exercise.

 

“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 of this
Warrant or the Note in the event Company fails to deliver shares of
Common Stock as and when required.

 

“Delivery
Shares” means those
shares of Common Stock issuable and deliverable upon the exercise
or partial exercise, as the case may be, of this
Warrant.

 

“DTC” means the Depository Trust Company or any
successor thereto.

 

“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
Investor’s brokerage firm for the benefit of
Investor.

 

“Excepted
Issuances” 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 issuance pursuant to such
Approved Stock Plan are not amended, modified or changed on or
after the Issue Date.

 

 

42

 

 

“Exercise
Price” means $0.05 per
share of Common Stock, as the same may be adjusted from time to
time pursuant to the terms and conditions of this
Warrant.

 

“Exercise
Shares” means those
Warrant Shares subject to an exercise of this Warrant by Investor.
By way of illustration only and without limiting the foregoing, if
(i) this Warrant is initially exercisable for 4,180,000 Warrant
Shares and Investor has not previously exercised this Warrant, and
(ii) Investor were to make a cashless exercise with respect to
5,000 Warrant Shares pursuant to which 6,000 Delivery Shares would
be issuable to Investor, then (1) this Warrant shall be deemed to
have been exercised with respect to 5,000 Exercise Shares, (2) this
Warrant would remain exercisable for 4,175,000 Warrant Shares, and
(3) this Warrant shall be deemed to have been exercised with
respect to 6,000 Delivery Shares.

 

“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 Company’s most recently filed Form 10-Q or Form
10-K.

 

“Market Price” means the Conversion Factor multiplied by
the average of the three (3) lowest VWAPs in the twenty (20)
Trading Days immediately preceding the applicable date of
exercise. By way of example only, if the Conversion Factor
were 75% and the average of the three lowest Closing Bid Prices in
the twenty (20) Trading Days immediately preceding the applicable
date of exercise were $1.00 then the Market Price would be $0.75
(75% x $1.00).

 

“Note” means that certain Secured Convertible
Promissory Note issued by Company to Investor pursuant to the
Purchase Agreement, as the same may be amended from time to time,
and including any promissory note(s) that replace or are exchanged
for such referenced promissory note.

 

“Trade Price” means the higher of: (i) the Closing Trade
Price of the Common Stock on the Issue Date; and (ii) the VWAP of
the Common Stock for the Trading Day that is two (2) Trading Days
prior to the Exercise Date.

 

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

 

“Transaction
Documents” means the
Purchase Agreement, the Note, this Warrant, and all other
documents, certificates, instruments and agreements entered into or
delivered in conjunction therewith, as the same may be amended from
time to time.

 

“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.

 

 

43

 

EXHIBIT A

 

NOTICE
OF EXERCISE OF WARRANT

 

TO:            

GROWLIFE,
INC.

ATTN:
_______________

VIA FAX
TO: ( )______________ EMAIL: ______________

 

The
undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant to Purchase Shares of Common Stock dated
as of October 15, 2018 (the “Warrant”), to purchase shares of
the common stock, $0.0001 par value (“Common Stock”), of Growlife, Inc.,
and tenders herewith payment in accordance with Section 2 of the
Warrant, as follows:

 

_______                       

CASH:
$__________________________ = (Exercise Price x Delivery
Shares)

 

_______ 

Payment is being
made by:

_____                                 

enclosed
check

_____                                 

wire
transfer

_____                                 

other

 

_______                       

CASHLESS
EXERCISE:

 

Net
number of Delivery Shares to be issued to Investor:
______*

 

* based
on:      

Current Market Value - (Exercise Price x Exercise
Shares)

               Adjusted
Price

 

Where:

Trade Price
[“TP”]         

=       

$____________

Exercise
Shares     

=       

_____________

Current Market
Value [TP x Exercise
Shares]     

=           

$____________

Exercise
Price       

=       

$____________

Adjusted
Price       

=       

$____________

 

Capitalized terms
used but not otherwise defined herein shall have the meanings
ascribed to them in the Warrant.

 

It is
the intention of Investor to comply with the provisions of Section
2.2 of the Warrant regarding certain limits on Investor’s
right to receive shares thereunder. Investor believes this exercise
complies with the provisions of such Section 2.2. Nonetheless, to
the extent that, pursuant to the exercise effected hereby, Investor
would receive more shares of Common Stock than permitted under
Section 2.2, Company shall not be obligated and shall not issue to
Investor such excess shares until such time, if ever, that Investor
could receive such excess shares without violating, and in full
compliance with, Section 2.2 of the Warrant.

 

As
contemplated by the Warrant, this Notice of Exercise is being sent
by email or by facsimile to the fax number and officer indicated
above.

 

If this
Notice of Exercise represents the full exercise of the outstanding
balance of the Warrant, Investor will surrender (or cause to be
surrendered) the Warrant to Company at the address indicated above
by express courier within five (5) Trading Days after the Warrant
Shares to be delivered pursuant to this Notice of Exercise have
been delivered to Investor.

 

 

44

 

 

So that DTC processing can begin, please deliver, via reputable
overnight courier, a certificate representing DTC Eligible Common
Stock equal in number to the Delivery Shares to:

 

Name:
______________________________________

Address:
_____________________________________

               _____________________________________

 

To the
extent the Delivery Shares are not DTC Eligible, please deliver a
certificate representing non-DTC Eligible Common Stock equal in
number to the Delivery Shares to the party and address set forth
immediately above.

 

 

Dated:                       

_____________________

 

___________________________

[Name
of Investor]

 

By:________________________

 

 

 

45

 

 

Exhibit C

 

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 Secured Convertible Promissory Note issued
by Company on October 15, 2018 (the “Note”) in the original principal
amount of $775,000.00 in favor of Iliad Research and Trading, L.P.,
a Utah limited partnership (“Investor”), pursuant to that
certain Securities Purchase Agreement dated October 15, 2018
between Investor and Company (the “Purchase Agreement”), personally
and 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 not made any Variable Security Issuances (as
defined in the Purchase Agreement) since the Closing Date (as
defined in the Purchase Agreement).

 

3. He agrees to cause
Company to comply with the covenants found in Sections 4(v) and
(vi) of the Purchase Agreement.

 

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 the Note on the terms set forth in the Purchase
Agreement and that but for his execution and issuance of this
Officer’s Certificate, Investor would not have purchased the
Note from Company.

 

IN
WITNESS WHEREOF, the undersigned, personally and in his capacity as
an officer of Company, has executed this Officer’s
Certificate as of October 15, 2018.

 

 

/s/
Marco Hegyi

Marco
Hegyi

 

 

46

 

Exhibit D

 

Security Agreement

 

This Security Agreement (this
“Agreement”),
dated as of October 15, 2018, is executed by Growlife, Inc., a
Delaware corporation (“Debtor”), in favor of Iliad
Research and Trading, L.P., a Utah limited partnership
(“Secured
Party”).

 

A.           Debtor
has issued to Secured Party a certain Secured Convertible
Promissory Note of even date herewith, as may be amended from time
to time, in the original face amount of $775,000.00 (the
“Note”).

 

B.           In
order to induce Secured Party to extend the credit evidenced by the
Note, Debtor has agreed to enter into this Agreement and to grant
Secured Party a security interest in the Collateral (as defined
below).

 

NOW,
THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Debtor hereby agrees with Secured Party as
follows:

 

20. Definitions and Interpretation.
When used in this Agreement, the following terms have the following
respective meanings:

 

“Collateral” has the meaning given
to that term in Section 2 hereof.

 

“Intellectual Property” means all
patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses (software or otherwise), information, know-how,
inventions, discoveries, published and unpublished works of
authorship, processes, any and all other proprietary rights, and
all rights corresponding to all of the foregoing throughout the
world, now owned and existing or hereafter arising, created or
acquired.

 

“Lien” shall mean, with respect to
any property, any security interest, mortgage, pledge, lien, claim,
charge or other encumbrance in, of, or on such property or the
income therefrom, including, without limitation, the interest of a
vendor or lessor under a conditional sale agreement, capital lease
or other title retention agreement, or any agreement to provide any
of the foregoing, and the filing of any financing statement or
similar instrument under the UCC or comparable law of any
jurisdiction.

 

“Obligations” means (a) all loans,
advances, future advances, debts, liabilities and obligations,
howsoever arising, owed by Debtor to Secured Party or any affiliate
of Secured Party of every kind and description, now existing or
hereafter arising, whether created by the Note, this Agreement,
that certain Securities Purchase Agreement of even date herewith,
entered into by and between Debtor and Secured Party (the
“Purchase
Agreement”), any other Transaction Documents (as
defined in the Purchase Agreement), any other agreement between
Debtor and Secured Party (or any affiliate of Secured Party) or any
other promissory note issued by Debtor in favor of Secured Party
(or any affiliate of Secured Party), any modification or amendment
to any of the foregoing, guaranty of payment or other contract or
by a quasi-contract, tort, statute or other operation of law,
whether incurred or owed directly to Secured Party or as an
affiliate of Secured Party or acquired by Secured Party or an
affiliate of Secured Party by purchase, pledge or otherwise, (b)
all costs and expenses, including attorneys’ fees, incurred
by Secured Party or any affiliate of Secured Party in connection
with the Note or in connection with the collection or enforcement
of any portion of the indebtedness, liabilities or obligations
described in the foregoing clause (a), (c) the payment of all other
sums, with interest thereon, advanced in accordance herewith to
protect the security of this Agreement, and (d) the performance of
the covenants and agreements of Debtor contained in this Agreement
and all other Transaction Documents.

 

 

 

47

 

 

“Permitted Liens” means (a) Liens
for taxes not yet delinquent or Liens for taxes being contested in
good faith and by appropriate proceedings for which adequate
reserves have been established, and (b) Liens in favor of Secured
Party under this Agreement or arising under the other Transaction
Documents or prior agreements between Debtor and Secured
Party.

 

“UCC” means the Uniform Commercial
Code as in effect in the state whose laws would govern the security
interest in, including without limitation the perfection thereof,
and foreclosure of the applicable Collateral.

 

Unless
otherwise defined herein, all terms defined in the UCC have the
respective meanings given to those terms in the UCC.

 

21. Grant of Security Interest. As
security for the Obligations, Debtor hereby pledges to Secured
Party and grants to Secured Party a security interest in all right,
title, interest, claims and demands of Debtor in and to the
property described in Schedule A hereto, and all
replacements, proceeds, products, and accessions thereof
(collectively, the “Collateral”).

 

22. Authorization to File Financing
Statements. Debtor hereby irrevocably authorizes Secured
Party at any time and from time to time to file in any filing
office in any Uniform Commercial Code jurisdiction or other
jurisdiction of Debtor or its subsidiaries (including without
limitation Delaware and Washington) any financing statements or
documents having a similar effect and amendments thereto that
provide any other information required by the Uniform Commercial
Code (or similar law of any non-United States jurisdiction, if
applicable) of such state or jurisdiction for the sufficiency or
filing office acceptance of any financing statement or amendment,
including whether Debtor is an organization, the type of
organization and any organization identification number issued to
Debtor. Debtor agrees to furnish any such information to Secured
Party promptly upon Secured Party’s request.

 

23. General Representations and
Warranties. Debtor represents and warrants to Secured Party
that (a) Debtor is the owner of the Collateral and that no other
person has any right, title, claim or interest (by way of Lien or
otherwise) in, against or to the Collateral, other than Permitted
Liens, (b) upon the filing of UCC-1 financing statements with the
Delaware Secretary of State and the Washington Secretary of State,
Secured Party shall have a perfected first-position security
interest in the Collateral to the extent that a security interest
in the Collateral can be perfected by such filing, except for
Permitted Liens, (c) Debtor has received at least a reasonably
equivalent value in exchange for entering into this Agreement, (d)
Debtor is not insolvent, as defined in any applicable state or
federal statute, nor will Debtor be rendered insolvent by the
execution and delivery of this Agreement to Secured Party; and (e)
as such, this Agreement is a valid and binding obligation of
Debtor.

 

24. Additional Covenants. Debtor
hereby agrees:

 

24.1. to
perform all acts that may be necessary to maintain, preserve,
protect and perfect in the Collateral, the Lien granted to Secured
Party therein, and the perfection and priority of such
Lien;

 

24.2. to
procure, execute (including endorse, as applicable), and deliver
from time to time any endorsements, assignments, financing
statements, certificates of title, and all other instruments,
documents and/or writings reasonably deemed necessary or
appropriate by Secured Party to perfect, maintain and protect
Secured Party’s Lien hereunder and the priority
thereof;

 

 

48

 

 

24.3. to
provide at least fifteen (15) days prior written notice to Secured
Party of any of the following events: (a) any changes or
alterations of Debtor’s name, (b) any changes with respect to
Debtor’s address or principal place of business, and (c) the
formation of any subsidiaries of Debtor;

 

24.4. upon
the occurrence of an Event of Default (as defined in the Note)
under the Note and, thereafter, at Secured Party’s request,
to endorse (up to the outstanding amount under such promissory
notes at the time of Secured Party’s request), assign and
deliver any promissory notes and all other instruments, documents,
or writings included in the Collateral to Secured Party,
accompanied by such instruments of transfer or assignment duly
executed in blank as Secured Party may from time to time
specify;

 

24.5. to
the extent the Collateral is not delivered to Secured Party
pursuant to this Agreement, to keep the Collateral at the principal
office of Debtor (unless otherwise agreed to by Secured Party in
writing), and not to relocate the Collateral to any other locations
without the prior written consent of Secured Party;

 

24.6. not
to sell or otherwise dispose, or offer to sell or otherwise
dispose, of the Collateral or any interest therein (other than
inventory in the ordinary course of business);

 

24.7. not
to, directly or indirectly, allow, grant or suffer to exist any
Lien upon any of the Collateral, other than Permitted
Liens;

 

24.8. not
to grant any license or sublicense under any of its Intellectual
Property, or enter into any other agreement with respect to any of
its Intellectual Property, except in the ordinary course of
Debtor’s business;

 

24.9. to the extent commercially
reasonable and in Debtor’s good faith business judgment: (a)
to file and prosecute diligently any patent, trademark or service
mark applications pending as of the date hereof or hereafter until
all Obligations shall have been paid in full, (b) to make
application on unpatented but patentable inventions and on
trademarks and service marks, (c) to preserve and maintain all
rights in all of its Intellectual Property, and (d) to ensure that
all of its Intellectual Property is and remains enforceable. Any
and all costs and expenses incurred in connection with each of
Debtor’s obligations under this Section 5.9 shall be borne by
Debtor. Debtor shall not knowingly and unreasonably abandon any
right to file a patent, trademark or service mark application, or
abandon any pending patent application, or any other of its
Intellectual Property, without the prior written consent of Secured
Party except for Intellectual Property that Debtor determines, in
the exercise of its good faith business judgment, is not or is no
longer material to its business;

 

24.10. upon
the request of Secured Party at any time or from time to time, and
at the sole cost and expense (including, without limitation,
reasonable attorneys’ fees) of Debtor, Debtor shall take all
actions and execute and deliver any and all instruments,
agreements, assignments, certificates and/or documents reasonably
required by Secured Party to collaterally assign any and all of
Debtor’s patent, copyright and trademark registrations and
applications now owned or hereafter acquired to and in favor of
Secured Party; and

 

24.11. at
any time amounts paid by Secured Party under the Transaction
Documents are used to purchase Collateral, Debtor shall perform all
acts that may be necessary, and otherwise fully cooperate with
Secured Party, to cause (a) any such amounts paid by Secured Party
to be disbursed directly to the sellers of any such Collateral, (b)
all certificates of title pertaining to such Collateral (as
applicable) to be properly filed and reissued to reflect Secured
Party’s Lien on such Collateral, and (c) all such reissued
certificates of title to be delivered to and held by Secured
Party.

 

 

49

 

 

25. Authorized Action by Secured
Party. Debtor hereby irrevocably appoints Secured Party as
its attorney-in-fact (which appointment is coupled with an
interest) and agrees that Secured Party may perform (but Secured
Party shall not be obligated to and shall incur no liability to
Debtor or any third party for failure so to do) any act which
Debtor is obligated by this Agreement to perform, and to exercise
such rights and powers as Debtor might exercise with respect to the
Collateral, including the right to (a) collect by legal proceedings
or otherwise and endorse, receive and receipt for all dividends,
interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (b) enter
into any extension, reorganization, deposit, merger, consolidation
or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral; (c)
make any compromise or settlement, and take any action Secured
Party deems advisable, with respect to the Collateral, including
without limitation bringing a suit in Secured Party’s own
name to enforce any Intellectual Property; (d) endorse Debtor’s name on all applications,
documents, papers and instruments necessary or desirable for
Secured Party in the use of any Intellectual Property; (e) grant or
issue any exclusive or non-exclusive license under any Intellectual
Property to any person or entity; (f) assign, pledge, sell, convey
or otherwise transfer title in or dispose of any Intellectual
Property to any person or entity; (g) cause the Commissioner of Patents and Trademarks, United
States Patent and Trademark Office (or as appropriate, such
equivalent agency in foreign countries) to issue any and all
patents and related rights and applications to Secured Party as the
assignee of Debtor’s entire interest therein; (h) file a copy
of this Agreement with any governmental agency, body or authority,
including without limitation the United States Patent and Trademark
Office and, if applicable, the United States Copyright Office or
Library of Congress, at the sole cost and expense of Debtor;
(i) insure, process and preserve the Collateral; (j) pay any
indebtedness of Debtor relating to the Collateral; (k) execute and
file UCC financing statements and other documents, certificates,
instruments and agreements with respect to the Collateral or as
otherwise required or permitted hereunder; and (l) take any and all
appropriate action and execute any and all documents and
instruments that may be necessary or useful to accomplish the
purposes of this Agreement; provided, however, that Secured Party
shall not exercise any such powers granted pursuant to clauses (a)
through (g) above prior to the occurrence of an Event of Default
and shall only exercise such powers during the continuance of an
Event of Default. The powers conferred on Secured Party under this
Section 6 are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers.
Secured Party shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers, and
neither Secured Party nor any of its stockholders, directors,
officers, managers, employees or agents shall be responsible to
Debtor for any act or failure to act, except with respect to
Secured Party’s own gross negligence or willful misconduct.
Nothing in this Section 6 shall be deemed an authorization for
Debtor to take any action that it is otherwise expressly prohibited
from undertaking by way of other provision of this
Agreement.

 

26. Default and
Remedies.

 

26.1. Default.
Debtor shall be deemed in default under this Agreement upon the
occurrence of an Event of Default.

 

26.2. Remedies. Upon the occurrence
of any such Event of Default, Secured Party shall have the rights
of a secured creditor under the UCC, all rights granted by this
Agreement and by law, including, without limiting the foregoing,
(a) the right to require Debtor to assemble the Collateral and make
it available to Secured Party at a place to be designated by
Secured Party, and (b) the right to take possession of the
Collateral, and for that purpose Secured Party may enter upon
premises on which the Collateral may be situated and remove the
Collateral therefrom. Debtor hereby agrees that fifteen (15)
days’ notice of a public sale of any Collateral or notice of
the date after which a private sale of any Collateral may take
place is reasonable. In addition, Debtor waives any and all rights
that it may have to a judicial hearing in advance of the
enforcement of any of Secured Party’s rights and remedies
hereunder, including, without limitation, Secured Party’s
right following an Event of Default to take immediate possession of
Collateral and to exercise Secured Party’s rights and
remedies with respect thereto. Secured Party may also have a
receiver appointed to take charge of all or any portion of the
Collateral and to exercise all rights of Secured Party under this
Agreement. Secured Party may exercise any of its rights under this
Section 7.2 without demand or notice of any kind. The remedies in
this Agreement, including without limitation this Section 7.2, are
in addition to, not in limitation of, any other right, power,
privilege, or remedy, either in law, in equity, or otherwise, to
which Secured Party may be entitled. No failure or delay on the
part of Secured party in exercising any right, power, or remedy
will operate as a waiver thereof, nor will any single or partial
exercise thereof preclude any other or further exercise thereof or
the exercise of any other right hereunder. All of Secured
Party’s rights and remedies, whether evidenced by this
Agreement or by any other agreement, instrument or document shall
be cumulative and may be exercised singularly or
concurrently.

 

 

50

 

 

26.3. Standards
for Exercising Rights and Remedies. To the extent that
applicable law imposes duties on Secured Party to exercise remedies
in a commercially reasonable manner, Debtor acknowledges and agrees
that it is not commercially unreasonable for Secured Party (a) to
fail to incur expenses reasonably deemed significant by Secured
Party to prepare Collateral for disposition, (b) to fail to obtain
third party consents for access to Collateral to be disposed of, or
to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to
fail to exercise collection remedies against account debtors or
other persons obligated on Collateral or to fail to remove liens or
encumbrances on or any adverse claims against Collateral, (d) to
exercise collection remedies against account debtors and other
persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media
of general circulation, whether or not the Collateral is of a
specialized nature, (f) to contact other persons, whether or not in
the same business as Debtor, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of
Collateral, whether or not the Collateral is of a specialized
nature, (h) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the
Collateral or that have the reasonable capability of doing so, or
that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim
disposition warranties, (k) to purchase insurance or credit
enhancements to insure Secured Party against risks of loss,
collection or disposition of Collateral or to provide to Secured
Party a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by Secured
Party, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist Secured Party in the
collection or disposition of any of the Collateral. Debtor
acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions by Secured
Party would fulfill Secured Party’s duties under the UCC in
Secured Party’s exercise of remedies against the Collateral
and that other actions or omissions by Secured Party shall not be
deemed to fail to fulfill such duties solely on account of not
being indicated in this Section. Without limitation upon the
foregoing, nothing contained in this Section shall be construed to
grant any rights to Debtor or to impose any duties on Secured Party
that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this Section.

 

26.4. Marshalling.
Secured Party shall not be required to marshal any present or
future Collateral for, or other assurances of payment of, the
Obligations or to resort to such Collateral or other assurances of
payment in any particular order, and all of its rights and remedies
hereunder and in respect of such Collateral and other assurances of
payment shall be cumulative and in addition to all other rights and
remedies, however existing or arising. To the extent that it
lawfully may, Debtor hereby agrees that it will not invoke any law
relating to the marshalling of Collateral which might cause delay
in or impede the enforcement of Secured Party’s rights and
remedies under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations
is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, Debtor hereby irrevocably waives the
benefits of all such laws.

 

26.5. Application
of Collateral Proceeds. The proceeds and/or avails of the
Collateral, or any part thereof, and the proceeds and the avails of
any remedy hereunder (as well as any other amounts of any kind held
by Secured Party at the time of, or received by Secured Party
after, the occurrence of an Event of Default) shall be paid to and
applied as follows:

 

First,
to the payment of reasonable costs and expenses, including all
amounts expended to preserve the value of the Collateral, of
foreclosure or suit, if any, and of such sale and the exercise of
any other rights or remedies, and of all proper fees, expenses,
liability and advances, including reasonable legal expenses and
attorneys’ fees, incurred or made hereunder by Secured
Party;

 

 

 

51

 

 

Second,
to the payment to Secured Party of the amount then owing or unpaid
on the Note (to be applied first to accrued interest and fees and
second to outstanding principal) and all amounts owed under any of
the other Transaction Documents or other documents included within
the Obligations; and

 

Third,
to the payment of the surplus, if any, to Debtor, its successors
and assigns, or to whosoever may be lawfully entitled to receive
the same.

 

In the
absence of final payment and satisfaction in full of all of the
Obligations, Debtor shall remain liable for any
deficiency.

 

27. Miscellaneous.

 

27.1. Notices.
Any notice required or permitted hereunder shall be given in the
manner provided in the subsection titled “Notices” in
the Purchase Agreement, the terms of which are incorporated herein
by this reference.

 

27.2. Non-waiver.
No failure or delay on Secured Party’s part in exercising any
right hereunder shall operate as a waiver thereof or of any other
right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other
right.

 

27.3. Amendments
and Waivers. This Agreement may not be amended or modified,
nor may any of its terms be waived, except by written instruments
signed by Debtor and Secured Party. Each waiver or consent under
any provision hereof shall be effective only in the specific
instances for the purpose for which given.

 

27.4. Assignment.
This Agreement shall be binding upon and inure to the benefit of
Secured Party and Debtor and their respective successors and
assigns; provided, however,
that Debtor may not sell, assign or delegate rights and obligations
hereunder without the prior written consent of Secured
Party.

 

27.5. Cumulative
Rights, etc. The rights, powers and remedies of Secured
Party under this Agreement shall be in addition to all rights,
powers and remedies given to Secured Party by virtue of any
applicable law, rule or regulation of any governmental authority,
or the Note, all of which rights, powers, and remedies shall be
cumulative and may be exercised successively or concurrently
without impairing Secured Party’s rights hereunder. Debtor
waives any right to require Secured Party to proceed against any
person or entity or to exhaust any Collateral or to pursue any
remedy in Secured Party’s power.

 

27.6. Partial
Invalidity. If any part of this Agreement is construed to be
in violation of any law, such part shall be modified to achieve the
objective of the parties to the fullest extent permitted and the
balance of this Agreement shall remain in full force and
effect.

 

27.7. Expenses.
Debtor shall pay on demand all reasonable fees and expenses,
including reasonable attorneys’ fees and expenses, incurred
by Secured Party in connection with the custody, preservation or
sale of, or other realization on, any of the Collateral or the
enforcement or attempt to enforce any of the Obligations which are
not performed as and when required by this Agreement.

 

27.8. Entire
Agreement. This Agreement and the other Transaction
Documents, taken together, constitute and contain the entire
agreement of Debtor and Secured Party with respect to this
particular matter and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the
subject matter hereof.

 

 

52

 

 

27.9. Governing
Law; Venue. Except as otherwise specifically set forth
herein, the parties expressly agree that this Agreement shall be
governed solely by the laws of the State of Utah, without giving
effect to the principles thereof regarding the conflict of laws;
provided, however, that
enforcement of Secured Party’s rights and remedies against
the Collateral as provided herein will be subject to the UCC.
The provisions set forth in the
Purchase Agreement to determine the
proper venue for any disputes are incorporated herein by this
reference.

 

27.10. 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 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.

 

27.11. Purchase
Agreement; Arbitration of Disputes. By executing this
Agreement, each party agrees to be bound by the terms, conditions
and general provisions of the Purchase Agreement and the other
Transaction Documents, including without limitation the Arbitration
Provisions (as defined in the Purchase Agreement) set forth as an
exhibit to the Purchase Agreement.

 

27.12. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be an original and all of which together shall
constitute one instrument. Any electronic copy of a party’s
executed counterpart will be deemed to be an executed
original.

 

27.13. Further
Assurances. Debtor 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 Secured 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.

 

27.14. Time
of the Essence. Time is expressly made of the essence with
respect to each and every provision of this Agreement.

 

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

 

53

 

IN
WITNESS WHEREOF, Secured Party and Debtor have caused this
Agreement to be executed as of the day and year first above
written.

 

SECURED
PARTY:

 

Iliad Research and Trading, L.P.

 

By:
Iliad Management, LLC, its General Partner

 

By:   

Fife
Trading, Inc., its Manager

 

 

By:
/s/ John Fife

      John
M. Fife, President

 

 

 

DEBTOR:

 

Growlife, Inc.

 

By:   

/s/ Marco
Hegyi

Name:
Marco Hegyi

Title:
CEO

 

 

54

 

 

SCHEDULE
A

TO
SECURITY AGREEMENT

 

All
right, title, interest, claims and demands of Debtor in and to all
of Debtor’s assets owned as of the date hereof and/or
acquired by Debtor at any time while the Obligations are still
outstanding, including without limitation, the following
property:

 

 

1. All equity
interests in all wholly- or partially-owned subsidiaries of
Debtor.

 

2. All customer
accounts, insurance contracts, and clients underlying such
insurance contracts.

 

3. All goods and
equipment now owned or hereafter acquired, including, without
limitation, all laboratory equipment, growing equipment, computer
equipment, office equipment, machinery, containers, fixtures,
vehicles, and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever
located;

 

4. All inventory now
owned or hereafter acquired, including, without limitation, all
merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products including such
inventory as is temporarily out of Debtor’s custody or
possession or in transit and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and
Debtor’s books relating to any of the foregoing;

 

5. All accounts
receivable, contract rights, general intangibles, healthcare
insurance receivables, payment intangibles and commercial tort
claims, now owned or hereafter acquired, including, without
limitation, all patents, patent rights and patent applications
(including without limitation, the inventions and improvements
described and claimed therein, and (a) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part
thereof, (b) all income, royalties, damages, proceeds and payments
now and hereafter due or payable under or with respect thereto,
including, without limitation, damages and payments for past or
future infringements thereof, (c) the right to sue for past,
present and future infringements thereof, and (d) all rights
corresponding thereto throughout the world), trademarks and service
marks (and applications and registrations therefor), inventions,
discoveries, copyrights and mask works (and applications and
registrations therefor), trade names, trade styles, software and
computer programs including source code, trade secrets, methods,
published and unpublished works of authorship, processes, know how,
drawings, specifications, descriptions, and all memoranda, notes,
and records with respect to any research and development, goodwill,
license agreements, information, any and all other proprietary
rights, franchise agreements, blueprints, drawings, purchase
orders, customer lists, route lists, infringements, claims,
computer programs, computer disks, computer tapes, literature,
reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind and whether in tangible
or intangible form or contained on magnetic media readable by
machine together with all such magnetic media, and all rights
corresponding to all of the foregoing throughout the world, now
owned and existing or hereafter arising, created or
acquired;

 

6. All now existing
and hereafter arising accounts, contract rights, royalties, license
rights and all other forms of obligations owing to Debtor arising
out of the sale or lease of goods, the licensing of technology or
the rendering of services by Debtor (subject, in each case, to the
contractual rights of third parties to require funds received by
Debtor to be expended in a particular manner), whether or not
earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Debtor and Debtor’s books
relating to any of the foregoing;

 

 

55

 

 

7. All documents,
cash, deposit accounts, letters of credit, letter of credit rights,
supporting obligations, certificates of deposit, instruments,
chattel paper, electronic chattel paper, tangible chattel paper and
investment property, including, without limitation, all securities,
whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or
otherwise, wherever located, now owned or hereafter acquired and
Debtor’s books relating to the foregoing;

 

8. All other assets,
goods and personal property of Debtor, wherever located, whether
tangible or intangible, and whether now owned or hereafter
acquired; and

 

9. Any and all claims,
rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds and products thereof,
including, without limitation, insurance, condemnation, requisition
or similar payments and the proceeds thereof.

 

 

56

 

 

Exhibit
E

 

IRREVOCABLE
LETTER OF INSTRUCTIONS TO TRANSFER AGENT

 

Date:
October 15, 2018

 

To the
transfer agent of Growlife, Inc.

 

Re:           

Instructions to Reserve and Issue Shares

 

Ladies
and Gentlemen:

 

A.

Reference is made
to that certain Secured Convertible Promissory Note dated as of
October 15, 2018 (as the same may be amended or exchanged from time
to time, the “Note”), made by Growlife, Inc., a
Delaware corporation (“Company”), pursuant to which
Company agreed to pay to Iliad Research and Trading, L.P., a Utah
limited partnership, its successors and/or assigns
(“Investor”),
the aggregate sum of $775,000.00, plus interest, fees, and
collection costs. The Note was issued pursuant to that certain
Securities Purchase Agreement dated October 15, 2018, by and
between Company and Investor (the “Purchase Agreement”, and together
with the Note, the Warrant (as defined below), and all other
documents entered into in conjunction therewith, including any
amendments thereto, the “Transaction Documents”). Pursuant
to the terms of the Note, the Outstanding Balance (as defined in
the Note) of the Note 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 Note, the “Conversion Shares”).

 

B.

Reference is also
made to that certain Warrant to Purchase Shares of Common Stock
dated October 15, 2018 (as the same may be amended or exchanged
from time to time, the “Warrant”), issued by Company in
connection with the Purchase Agreement, pursuant to which Investor
may purchase shares of Common Stock. All shares of Common Stock
that may be purchased under the Warrant or that Company is
otherwise required to issue to Investor or its broker upon any
exercise of the Warrant are hereinafter referred to as the
“Warrant
Shares”. The Conversion Shares, together with the
Warrant Shares, are hereinafter referred to as the
“Shares”.

 

C.

Pursuant to the
terms of the Purchase Agreement, Company has agreed to establish a
reserve of shares of authorized but unissued Common Stock for
Investor’s sole and exclusive benefit in an amount not less
than 350,000,000 shares (the “Share Reserve”). Company further
agreed to add additional shares of Common Stock to the Share
Reserve in increments of 5,000,000 shares, as and when requested by
Investor, if the number of shares being held in the Share Reserve
is less than the amount calculated as follows: (a) three (3) times
the number of shares of Common Stock obtained by dividing the
Outstanding Balance by the Conversion Price (as defined in the
Note), plus (b) three (3)
times the number of Delivery Shares (as defined in the Warrant)
that would be required to be delivered to Investor in order to
effect a complete exercise of the Warrant pursuant to the terms
thereof. For the avoidance of doubt, this Share Reserve shall be in
addition to any previous share reserves put in place for the
benefit of Investor.

 

D.

 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 Note or exercise of the
Warrant, as follows:

 

 

57

 

 

From
and after the date hereof and until all of Company’s
obligations under the Purchase Agreement and the Note are paid and
performed in full and the Warrant is exercised in full (or
otherwise expired), (a) you shall establish a reserve of shares of
authorized but unissued Common Stock in an amount not less than the
Share Reserve, (b) you shall maintain and hold the Share Reserve
for the exclusive benefit of Investor, (c) you shall issue the
shares of Common Stock held in the Share 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 Note or Warrant 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 Share Reserve unless and until
there are no authorized shares of Common Stock available for
issuance other than those held in the Share 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 Note or the Warrant from the
Share Reserve, (e) you shall not otherwise reduce the Share 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 Share Reserve in increments of
5,000,000 shares as and when requested by Company or Investor in
writing from time to time.

 

You shall issue the Conversion
Shares to Investor or its broker in accordance with Paragraph 4
upon a conversion of all or any portion of the Note, upon delivery
to you of a duly executed Conversion Notice substantially in the
form attached hereto as Exhibit A (a
“Conversion
Notice”). By your signature below, you acknowledge and
agree that a conversion of the Note may include any conversion by
Investor of any judgment amount or arbitration award granted in
favor of Investor, as set forth in the Note, and that you will
issue Shares to Investor in accordance with Paragraph 4 below upon
Investor’s delivery to you of a duly executed Conversion
Notice wherein Investor seeks to convert any portion of any
judgment amount or arbitration award granted in favor of Investor.
You further acknowledge that Company and Investor have agreed that
it is their expectation that any such judgment amount or
arbitration award that is converted will tack back to the Purchase
Price Date (as defined in the Note) for purposes of determining the
holding period under Rule 144 (as defined below) and that Company
agreed that it will not take a contrary position in any filing,
document, letter, agreement or setting.

 

You shall issue the Warrant
Shares to Investor or its broker in accordance with Paragraph 4
upon exercise of all or any portion of the Warrant, upon delivery
to you of a duly executed Notice of Exercise substantially in the
form attached hereto as Exhibit B (the
“Notice of
Exercise”).

 

In connection with a Conversion
Notice or Notice of Exercise delivered to you pursuant to Paragraph
2 and/or Paragraph 3 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 Securities Act of 1933, as amended
(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 or
Notice of Exercise and an Opinion Letter, you shall, within three
(3) Trading Days (as defined below) thereafter, (i) if the Common
Stock is eligible to be deposited in certificate form with the
Depository Trust Company (“DTC”) and cleared and converted
into electronic shares by the DTC and held in the name of the
clearing firm servicing Investor’s brokerage firm for the
benefit of Investor (“DTC
Eligible”), deliver to Investor or its broker (as
specified in the applicable Conversion Notice or Notice of
Exercise), via reputable overnight courier, to the address
specified in the Conversion Notice or Notice of Exercise, as the
case may be, a certificate, registered in the name of Investor or
its designee, representing such aggregate number of shares of DTC
Eligible Common Stock as have been requested by Investor to be
transferred in the Conversion Notice or Notice of Exercise, and
take all other action reasonably necessary to accomplish the prompt
processing of such DTC Eligible Common Stock such that such Common
Stock is deposited in certificate form at the DTC, cleared and
converted into electronic shares by the DTC and eventually held in
the name of the clearing firm servicing Investor’s brokerage
firm for the benefit of Investor in a timely manner, or (ii) if the
Common Stock is not then DTC Eligible, issue and deliver to
Investor or its broker (as specified in the applicable Conversion
Notice or Notice of Exercise), via reputable overnight courier, to
the address specified in the Conversion Notice or the Notice of
Exercise, as the case may be, 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 or the Notice of Exercise, as
applicable. 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.

 

 

58

 

 

If you
receive a Conversion Notice or Notice of Exercise, 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.

 

Notwithstanding
the foregoing or any other provision of this Letter, Company
acknowledges and agrees that any such legend shall be removed from
all certificates for DTC Eligible (as defined below) Common Stock
delivered to Investor or its broker under the Note as such Common
Stock is cleared and converted into electronic shares by the DTC
(as defined below).

 

Please
note that a share issuance resolution is not required for each
conversion and issuance of Conversion Shares or each exercise of
the Warrant and issuance of Warrant Shares since this Letter and
the Transaction 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 Conversion
Shares and Warrant 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 Conversion Shares and Warrant
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 Purchase 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 and Notice of
Exercise.

 

 

59

 

 

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
Share 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.

 

Notwithstanding
anything to the contrary herein or in any previous Irrevocable
Letter of Instructions to Transfer Agent with Investor and Company,
Company hereby agrees that the Share Reserve set forth in this
Letter may, at Investor’s election, be used to satisfy any
prior obligations owed by Company to Investor or any obligations
owed by Company to Investor that may arise in the future. Company
further agrees that any prior or future share reserves established
for the benefit of Investor or any of its affiliates may also be
used to satisfy Company’s obligations under the
Note.

 

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
Note. Company further acknowledges that without such
representations and covenants of Company, Investor would not have
made the loan to Company evidenced by the Note.

 

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. By your signature
below, you agree to honor any injunction issued by any arbitrator
or court of competent jurisdiction that requires Company (i) to
issue shares of Common Stock to Investor, or (ii) to refrain from
issuing shares of Common Stock to any person or entity other than
Investor. You further agree to honor such injunction even if it
does not name you as a party or has not been domesticated in the
state in which your principal office is located.

 

 

60

 

 

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 Transaction 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 Transaction 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
Purchase Agreement) set forth as an exhibit to the Purchase
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, 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.

 

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

 

61

 

 

Very
truly yours,

 

Growlife, Inc.

 

 

By: /s/
Marco Hegyi

Name:
Marco Hegyi

Title:
CEO

 

ACKNOWLEDGED
AND AGREED:

 

INVESTOR:

 

Iliad Research and Trading, L.P.

 

By: Iliad Management, LLC, its General Partner

 

By:
Fife Trading, Inc., its Manager

 

 

By:
John Fife

      John
M. Fife, President

 

 

TRANSFER
AGENT:

 

Direct Transfer, LLC

 

 

By:
Eddie Tobler

Name:
Eddie Tobler

Title:
VP Stock Transfer

 

 

Attachments:

 

Exhibit
J

Form of
Conversion Notice

Exhibit
K

Form of Notice
of Exercise

 

 

62

 

Exhibit
F

GROWLIFE, INC.

SECRETARY’S CERTIFICATE

 

I, Mark
Scott, hereby certify that I am the duly elected, qualified and
acting Secretary of Growlife, Inc., a Delaware corporation
(“Company”), and
I am authorized to execute this Secretary’s Certificate (this
“Certificate”)
on behalf of Company. This Certificate is delivered in connection
with that certain Securities Purchase Agreement dated October 15,
2018 (the “Purchase
Agreement”), by and between Company and Iliad Research
and Trading, L.P., a Utah limited partnership.

 

Solely
in my capacity as Secretary, I certify that Schedule 1 attached hereto 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 Purchase
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 made this Secretary’s Certificate
effective as of October 15, 2018.

 

Growlife,
Inc.

 

 

/s/
Mark Scott

Printed
Name: Mark Scott

Title:
Secretary

 

 

63

 

 

Exhibit G

Share Issuance Resolution

Authorizing The Issuance Of New Shares Of Common Stock
In

 

Growlife, Inc.

___________________________

 

Effective
October 15, 2018

___________________________

 

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 (i) that certain Secured
Convertible Promissory Note in the face amount of $775,000.00 with
an original issuance date of October 15, 2018 (the
“Note”), made by
Company in favor of Iliad Research and Trading, L.P., a Utah
limited partnership, its successors and/or assigns
(“Investor”),
and (ii) that certain Warrant to Purchase Shares of Common Stock
issued by Company to Investor (the “Warrant”), all pursuant to that
certain Securities Purchase Agreement dated October 15, 2018, by
and between Company and Investor (the “Purchase 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:

 

(i)

a Conversion Notice
substantially in the form of Exhibit A attached hereto,
whether an original or a copy (the “Conversion Notice”),
and

 

(ii)

a Notice of
Exercise of Warrant substantially in the form of Exhibit B attached hereto,
whether an original or a copy (the “Notice of Exercise”),

 

in each
case 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,

 

(ii)

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

 

(iii)

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 Note or the Warrant, as the case may
be,

 

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 Note or the Warrant, as the
case may be.

 

RESOLVED FURTHER,
that consistent with the terms of the Purchase Agreement, the
Transfer Agent is authorized and directed to immediately create a
share reserve equal to 350,000,000 shares of Company’s Common
Stock for the benefit of Investor (the “Share Reserve”); provided that the Share Reserve may
increase in increments of 5,000,000 shares from time to time by
written instructions provided to the Transfer Agent by Company or
Investor as required by the Purchase Agreement and as contemplated
by the Board Resolutions.

 

 

 

64

 

 

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 Share
Reserve held by the transfer agent; provided, however, that upon (i) full
conversion and/or full repayment of the Note and (ii) the complete
exercise (or expiration) of the Warrant, the Share 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 increasing the Share Reserve from time
to time required by the Purchase 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                                

October 15,
2018

Officer’s
Signature                                                                           Date

 

Marco
Hegyi, CEO

Printed
Name and Title

 

 

EXHIBITS
ATTACHED TO SHARE ISSUANCE RESOLUTION:

 

Exhibit
A

Conversion
Notice

Exhibit
B 

Notice of
Exercise

 

 

65

 

 

EXHIBIT
I

 

RESTRICTED INVESTOR LIST

 

 
Not
applicable

  

 

 

66EX-4.9

 Exhibit 4.9 

ARAVIVE, INC. 
 2017
EQUITY INCENTIVE PLAN 
 ADOPTED BY THE BOARD OF DIRECTORS: MARCH 30, 2017 

APPROVED BY THE STOCKHOLDERS: JUNE 20, 2017 

TERMINATION DATE: MARCH 30, 2027 
  

	1.	 GENERAL. 

(a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are Employees, Directors and Consultants. 

(b) Available Stock Awards. The Plan provides for the grant of the following Stock Awards: (i) Incentive Stock Options;
(ii) Nonstatutory Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted Stock Awards; and (v) Restricted Stock Unit Awards. 

(c) Purpose. The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to
receive Stock Awards as set forth in Section 1(a), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an
opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards. 
  

	2.	 ADMINISTRATION. 

(a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration of the Plan
to a Committee or Committees, as provided in Section 2(c). 
 (b) Powers of Board. The Board shall have the power, subject
to, and within the limitations of, the express provisions of the Plan: 
 (i) To determine from time to time (A) which of the
persons eligible under the Plan shall be granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to a Stock Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted
to each such person; and (F) the Fair Market Value applicable to a Stock Award. 
 (ii) To construe and interpret the Plan and
Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Stock Award fully effective. 

  
 1. 

 (iii) To settle all controversies regarding the Plan and Stock Awards granted under
it. 
 (iv) To accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest. 

(v) To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations under
any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant. 
 (vi) To amend the
Plan in any respect the Board deems necessary or advisable, including, without limitation, amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or
Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 9(a) relating to Capitalization Adjustments, to the extent required by applicable law,
stockholder approval shall be required for any amendment of the Plan that either (A) materially increases the number of shares of Common Stock available for issuance under the Plan; (B) materially expands the class of individuals eligible
to receive Stock Awards under the Plan; (C) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan; (D) materially
extends the term of the Plan; or (E) expands the types of Stock Awards available for issuance under the Plan. Except as provided above, rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of
the Plan unless (1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing. 

(vii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to
satisfy the requirements of Section 422 of the Code regarding Incentive Stock Options. 
 (viii) To approve forms of Stock Award
Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Stock Award Agreement, subject to
any specified limits in the Plan that are not subject to Board discretion; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected
Participant, and (ii) such Participant consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without the affected Participant’s consent, the Board may amend the terms of any one or
more Stock Awards if necessary to maintain the qualified status of the Stock Award as an Incentive Stock Option or to bring the Stock Award into compliance with Section 409A of the Code. 

(ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests
of the Company and that are not in conflict with the provisions of the Plan or Stock Awards. 

  
 2. 

 (x) To adopt such procedures and sub-plans as
are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States. 

(xi) To effect, at any time and from time to time, with the consent of any adversely affected Participant, (A) the reduction of the
exercise price (or strike price) of any outstanding Option or SAR under the Plan; (B) the cancellation of any outstanding Option or SAR under the Plan and the grant in substitution therefore of (1) a new Option or SAR under the Plan or
another equity plan of the Company covering the same or a different number of shares of Common Stock, (2) a Restricted Stock Award, (3) a Restricted Stock Unit Award, (4) cash and/or (5) other valuable consideration (as
determined by the Board, in its sole discretion); or (C) any other action that is treated as a repricing under generally accepted accounting principles; provided, however, that no such reduction or cancellation may be effected if it is
determined, in the Company’s sole discretion, that such reduction or cancellation would result in any such outstanding Option becoming subject to the requirements of Section 409A of the Code. 

(c) Delegation to Committee. The Board may delegate some or all of the administration of the Plan to a Committee or Committees.
If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to
delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some
or all of the powers previously delegated. 
 (d) Delegation to an Officer. The Board may delegate to one or more Officers of
the Company the authority to do one or both of the following: (i) designate Officers and Employees of the Company or any of its Subsidiaries to be recipients of Options and Stock Appreciation Rights (and, to the extent permitted by applicable
law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Officers and Employees; provided, however, that the Board resolutions regarding such
delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding the foregoing, the Board may
not delegate authority to an Officer to determine the Fair Market Value pursuant to Section 13(t) below. 
 (e) Effect of
Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. 

  
 3. 

	3.	 SHARES SUBJECT TO THE PLAN.

 (a) Share Reserve. Subject to the provisions of Section 9(a) relating to Capitalization
Adjustments, the maximum aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards beginning on the Effective Date shall be Two Million Three Hundred Thirty Eight Thousand Eight Hundred Thirty Four (2,338,834) shares
(the “Share Reserve”). In addition, the Share Reserve will automatically increase each time the Company issues: (i) shares of Common Stock or (ii) securities convertible into shares of Common Stock by such number of
shares of Common Stock as shall equal fifteen (15%) of the number of: (x) newly issued shares of Common Stock or (y) shares of Common Stock into which the newly issued securities are then convertible; provided, that no adjustment shall be
made under sub-section (x) of this Section 3(a) upon the issuance of any shares of Common Stock upon conversion of Company securities if an adjustment had already been effected under sub-section (y) of this Section 3(a) in respect of such issuable shares; provided, further, that the maximum aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards shall not
be reduced if any such convertible securities issued by the Company are retired, redeemed or otherwise expire unexercised, except that if convertible securities issued by the Company and the proceeds are used to retire or redeem any convertible
securities issued by the Company, in which case the adjustment to be made with reflect only the net amount of additional shares issuable in respect of such convertible securities.. Furthermore, if a Stock Award: (i) expires or otherwise
terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the Stock Award receives cash rather than stock), such expiration, termination or settlement shall not reduce (or otherwise offset) the number of
shares of Common Stock that may be issued pursuant to the Plan. For clarity, the limitation in this Section 3(a) is a limitation in the number of shares of Common Stock that may be issued pursuant to the Plan. Accordingly, this
Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a). 
 (b) Reversion of Shares
to the Share Reserve. If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares
which are forfeited shall revert to and again become available for issuance under the Plan. Also, any shares reacquired by the Company pursuant to Section 8(g) or as consideration for the exercise of an Option shall again become available for
issuance under the Plan. Notwithstanding the provisions of this Section 3(b), any such shares shall not be subsequently issued pursuant to the exercise of Incentive Stock Options. 

(c) Individual Limit. Notwithstanding anything to the contrary in this Section 3(c), subject to the provisions of
Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued to any one Participant during any tax year of the Company shall be limited to 1,000,000 shares of Common Stock. 

(d) Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock,
including shares repurchased by the Company on the open market or otherwise. 
  

	4.	 ELIGIBILITY. 

(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a
“parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and
Consultants; provided, however, Nonstatutory Stock Options and SARs may not be granted to Employees, Directors and 

  
 4. 

 
Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405, unless the stock underlying such Stock Awards is treated as
“service recipient stock” under Section 409A of the Code because the Stock Awards are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Stock Awards comply with the distribution requirements
of Section 409A of the Code. 
 (b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant. 

(c) Consultants. A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or
the sale of the Company’s securities to such Consultant is not exempt under Rule 701 because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of any other
provision of Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant
jurisdictions. 
  

	5.	 PROVISIONS RELATING TO OPTIONS
AND STOCK APPRECIATION RIGHTS. 

 Each Option or SAR shall
be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued,
a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock
Option. The provisions of separate Options or SARs need not be identical; provided, however, that each Option Agreement or Stock Appreciation Right Agreement shall conform to (through incorporation of provisions hereof by reference in the applicable
Stock Award Agreement or otherwise) the substance of each of the following provisions: 
 (a) Term. Subject to the provisions
of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Stock Award Agreement. 

(b) Exercise Price. Subject to the provisions of Section 4(b) regarding Incentive Stock Options granted to Ten Percent
Stockholders, the exercise price (or strike price) of each Option or SAR shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Option or SAR is granted.
Notwithstanding the foregoing, an Option or SAR may be granted with an exercise price (or strike price) lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option or SAR if such Option or SAR is granted
pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Sections 409A and 424(a) of the Code (whether or not such Stock Awards
are Incentive Stock Options). Each SAR will be denominated in shares of Common Stock equivalents. 

  
 5. 

 (c) Consideration for Options. The purchase price of Common Stock acquired
pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the authority to
grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The permitted
methods of payment are as follows: 
 (i) by cash, check, bank draft or money order payable to the Company; 

(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the
stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds; 

(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock; 

(iv) if the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce
the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment
from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be subject to an
Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such
exercise, and (C) shares are withheld to satisfy tax withholding obligations; 
 (v) according to a deferred payment or similar
arrangement with the Optionholder; provided, however, that interest shall compound at least annually and shall be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation
income to the Optionholder under any applicable provisions of the Code, and (B) the classification of the Option as a liability for financial accounting purposes; or 

(vi) in any other form of legal consideration that may be acceptable to the Board. 

(d) Exercise and Payment of a SAR. To exercise any outstanding Stock Appreciation Right, the Participant must provide written
notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not
greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the
Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that will be determined by the Board at

  
 6. 

 
the time of grant of the Stock Appreciation Right. The appreciation distribution in respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in
any other form of consideration, as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 

(e) Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of
Options and SARs as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs shall apply: 

(i) Restrictions on Transfer. An Option or SAR shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant only by the Participant; provided, however, that the Board may, in its sole discretion, permit transfer of the Option or SAR to such extent as permitted by Rule 701 and in
a manner consistent with applicable tax and securities laws upon the Participant’s request. 
 (ii) Domestic Relations
Orders. Notwithstanding the foregoing, an Option or SAR may be transferred pursuant to a domestic relations order; provided, however, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as
a result of such transfer. 
 (iii) Beneficiary Designation. Notwithstanding the foregoing, the Participant may, by delivering
written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Participant, shall
thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate shall be
entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. 
 (f)
Vesting Generally. The total number of shares of Common Stock subject to an Option or SAR may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms
and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary.
The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised. 

(g) Termination of Continuous Service. Except as otherwise provided in the applicable Stock Award Agreement or other agreement
between the Participant and the Company, in the event that a Participant’s Continuous Service terminates (other than for Cause or upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the
extent that the Participant was entitled to exercise such Stock Award as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination
of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Award Agreement, which period shall not be less than 

  
 7. 

 
thirty (30) days if necessary to comply with applicable state laws unless such termination is for Cause) or (ii) the expiration of the term of the Option or SAR as set forth in the
Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the time specified herein or in the Stock Award Agreement (as applicable), the Option or SAR shall terminate. 

(h) Extension of Termination Date. Except as otherwise provided in the applicable Stock Award Agreement or other agreement
between the Participant and the Company, if the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause or upon the Participant’s death or Disability) would be prohibited at any
time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR shall terminate on the earlier of (i) the expiration of a period of three (3) months
after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option or SAR as set forth
in the Stock Award Agreement. In addition, unless otherwise provided in a Participant’s Award Agreement, if the sale of any Common Stock received upon exercise of an Option or SAR following the termination of the Participant’s Continuous
Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR shall terminate on the earlier of (i) the expiration of a period equal to the applicable post-termination exercise period after the
termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth
in the applicable Stock Award Agreement. 
 (i) Disability of Participant. Except as otherwise provided in the applicable Stock
Award Agreement or other agreement between the Participant and the Company, in the event that a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR
(to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following
such termination of Continuous Service (or such longer or shorter period specified in the Stock Award Agreement, which period shall not be less than six (6) months if necessary to comply with applicable state laws), or (ii) the expiration
of the term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the time specified herein or in the Stock Award Agreement (as
applicable), the Option or SAR shall terminate. 
 (j) Death of Participant. Except as otherwise provided in the applicable
Stock Award Agreement or other agreement between the Participant and the Company, in the event that (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the
period (if any) specified in the Stock Award Agreement after the termination of the Participant’s Continuous Service for a reason other than death, then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise
such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the
Participant’s death, but only within the period ending on the earlier of (i) the date twelve (12) months following the date of death (or such longer or shorter period specified 

  
 8. 

 
in the Stock Award Agreement, which period shall not be less than six (6) months if necessary to comply with applicable state laws), or (ii) the expiration of the term of such Option or
SAR as set forth in the Stock Award Agreement. If, after the Participant’s death, the Option or SAR is not exercised within the time specified herein or in the Stock Award Agreement (as applicable), the Option or SAR shall terminate. 

(k) Termination for Cause. Except as explicitly provided otherwise in a Participant’s Stock Award Agreement, if a
Participant’s Continuous Service is terminated for Cause, the Option or SAR shall terminate upon the termination date of such Participant’s Continuous Service, and the Participant shall be prohibited from exercising his or her Option or
SAR from and after the time of such termination of Continuous Service. 
 (l) Non-Exempt
Employees. No Option or SAR granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock
until at least six months following the date of grant of the Option or SAR. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, in the event of the Participant’s death or Disability, upon a
Corporate Transaction or a Change in Control in which the vesting of such Options or SARs accelerates, or upon the Participant’s retirement (as such term may be defined in the Participant’s Stock Award Agreement or in another applicable
agreement or in accordance with the Company’s then current employment policies and guidelines) any such vested Options and SARs may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate
so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. 

(m) Early Exercise of Options. An Option may, but need not, include a provision whereby the Optionholder may elect at any time
before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Subject to the “Repurchase
Limitation” in Section 8(l), any unvested shares of Common Stock so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate. Provided that the
“Repurchase Limitation” in Section 8(l) is not violated, the Company shall not be required to exercise its repurchase right until at least six (6) months (or such longer or shorter period of time required to avoid
classification of the Option as a liability for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option Agreement. 

(n) Right of Repurchase. Subject to the “Repurchase Limitation” in Section 8(l), the Option or SAR
may include a provision whereby the Company may elect to repurchase all or any part of the vested shares of Common Stock acquired by the Participant pursuant to the exercise of the Option or SAR. 

(o) Right of First Refusal. The Option or SAR may include a provision whereby the Company may elect to exercise a right of first
refusal following receipt of notice from the Participant of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option or SAR. Such right of first refusal shall be subject to the
“Repurchase Limitation” in Section 8(l). Except as expressly provided in this Section 5(o) or in the Stock Award Agreement, such right of first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company. 

  
 9. 

	6.	 PROVISIONS OF RESTRICTED STOCK
AWARDS AND RESTRICTED STOCK UNITS. 

(a) Restricted Stock Awards. Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until
any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The terms and conditions of Restricted Stock Award Agreements
may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical; provided, however, that each Restricted Stock Award Agreement shall conform to (through incorporation of the provisions
hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 
 (i) Consideration. A
Restricted Stock Award may be awarded in consideration for (A) cash or cash equivalents; (B) past or future services actually or to be rendered to the Company or an Affiliate; or (C) any other form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible under applicable law. 
 (ii) Vesting. Subject to the
“Repurchase Limitation” in Section 8(l), shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the
Board. 
 (iii) Termination of Participant’s Continuous Service. If a Participant’s Continuous Service terminates,
the Company may receive through a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted
Stock Award Agreement. 
 (iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award
Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the
Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement. 
 (v) Dividends. A
Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate. 

(b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be
identical, provided, however, that each Restricted Stock Unit Award Agreement shall conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions: 

  
 10. 

 (i) Consideration. At the time of grant of a Restricted Stock Unit Award, the
Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common
Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law. 

(ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions or conditions to
the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate. 
 (iii) Payment. A Restricted
Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

 (iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate,
may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award. 

(v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock
Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock
Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock
Unit Award Agreement to which they relate. 
 (vi) Termination of Participant’s Continuous Service. Except as otherwise
provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service. 

(vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any
Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of
Section 409A of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. For example, such restrictions may include, without
limitation, a requirement that any Common Stock that is to be issued in a year following the year in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed pre-determined
schedule. 

  
 11. 

	7.	 COVENANTS OF THE COMPANY.

 (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at
all times the number of shares of Common Stock reasonably required to satisfy such Stock Awards. 
 (b) Securities Law
Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the
Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock
pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities law. 
 (c) No Obligation
to Notify. The Company shall have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such
holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock
Award. 
  

	8.	 MISCELLANEOUS. 

(a) Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company. 
 (b) Corporate Action Constituting Grant of Stock Awards. Corporate action
constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing
the Stock Award is communicated to, or actually received or accepted by, the Participant. 
 (c) Stockholder Rights. No
Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until (i) such Participant has satisfied all requirements for exercise
of the Stock Award pursuant to its terms, if applicable, and (ii) the issuance of the Common Stock subject to such Stock Award has been entered into the books and records of the Company. 

(d) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or any other instrument executed
thereunder or in connection with any Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an Employee 

  
 12. 

 
with or without notice and with or without cause; (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate; or
(iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. 

(e) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of
grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000),
the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s). 

(f) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under
any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the
Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered
under a then currently effective registration statement under the Securities Act, or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common Stock. 
 (g) Withholding Obligations. Unless
prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means or by a combination of such means:
(i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting
purposes); (iii) withholding payment from any amounts otherwise payable to the Participant; (iv) withholding cash from a Stock Award settled in cash; or (v) by such other method as may be set forth in the Stock Award Agreement. 

  
 13. 

 (h) Electronic Delivery. Any reference herein to a “written”
agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet. 

(i) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of
Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by
Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the
Company. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous
Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law. 

(j) Compliance with Section 409A. To the extent that the Board determines that any Stock Award granted
hereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the
extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code. 
 (k)
Compliance with Exemption Provided by Rule 12h-1(f). If: (i) the aggregate of the number of Optionholders and the number of holders of all other outstanding compensatory employee stock options to
purchase shares of Common Stock equals or exceeds five hundred (500); and (ii) the assets of the Company at the end of the Company’s most recently completed fiscal year exceed $10 million, then the following restrictions shall apply
during any period during which the Company does not have a class of its securities registered under Section 12 of the Exchange Act and is not required to file reports under Section 15(d) of the Exchange Act: (A) the Options and, prior
to exercise, the shares of Common Stock acquired upon exercise of the Options may not be transferred until the Company is no longer relying on the exemption provided by Rule 12h-1(f) promulgated under the
Exchange Act (“Rule 12h-1(f)”), except: (1) as permitted by Rule 701(c) promulgated under the Securities Act, (2) to a guardian upon the disability of the Optionholder, or
(3) to an executor upon the death of the Optionholder (collectively, the “Permitted Transferees”); provided, however, the following transfers are permitted: (i) transfers by the Optionholder to the Company, and
(ii) transfers in connection with a change of control or other acquisition involving the Company, if following such transaction, the Options no longer remain outstanding and the Company is no longer relying on the exemption provided by Rule 12h-1(f); provided further, that any Permitted Transferees may not further transfer the Options; (B) except as otherwise provided in (A) above, the Options and shares of Common Stock acquired upon exercise
of the Options are restricted as to any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” as defined by Rule 16a-1(h) promulgated under the
Exchange Act, or any “call equivalent position” as defined by Rule 16a-1(b) promulgated under the Exchange Act by the Optionholder prior to exercise of an Option until the Company is no longer
relying on the exemption provided by Rule 12h-1(f); and (C) at any time that the Company is relying on the exemption provided by Rule 12h-1(f), the Company shall

  
 14. 

 
deliver to Optionholders (whether by physical or electronic delivery or written notice of the availability of the information on an internet site) the information required by Rule 701(e)(3), (4)
and (5) promulgated under the Securities Act every six (6) months, including financial statements that are not more than one hundred eighty (180) days old; provided, however, that the Company may condition the delivery of such
information upon the Optionholder’s agreement to maintain its confidentiality. 
 (l) Repurchase Limitation. The terms of
any repurchase right shall be specified in the Stock Award Agreement. The repurchase price for vested shares of Common Stock shall be the Fair Market Value of the shares of Common Stock on the date of repurchase. The repurchase price for unvested
shares of Common Stock shall be the lower of (i) the Fair Market Value of the shares of Common Stock on the date of repurchase; or (ii) their original purchase price. However, the Company shall not exercise its repurchase right until at
least six (6) months (or such longer or shorter period of time necessary to avoid classification of the Stock Award as a liability for financial accounting purposes) have elapsed following delivery of shares of Common Stock subject to the Stock
Award, unless otherwise specifically provided by the Board. 
  

	9.	 ADJUSTMENTS UPON CHANGES IN
COMMON STOCK; OTHER CORPORATE EVENTS. 

(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately
adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities that may be issued pursuant to Section 3(c); and (iii) the class(es) and
number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. 

(b) Dissolution or Liquidation. Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or
liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) shall terminate
immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company
notwithstanding the fact that the holder of such Stock Award is providing Continuous Service; provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject
to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion. 

(c) Corporate Transaction. The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless
otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock
Award. Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board shall take one or more of the following actions with respect to Stock Awards,
contingent upon the closing or completion of the Corporate Transaction: 

  
 15. 

 (i) arrange for the surviving corporation or acquiring corporation (or the surviving
or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of
the Company pursuant to the Corporate Transaction); 
 (ii) arrange for the assignment of any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company); 

(iii) accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be
exercised) to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective date of the Corporate
Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction; 

(iv) arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Stock Award; 

(v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of
the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and 

(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property
the holder of the Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with such exercise. 

The Board need not take the same action with respect to all Stock Awards or with respect to all Participants. 

(d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a
Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such
acceleration shall occur. 
  

	10.	 TERMINATION OR SUSPENSION OF THE
PLAN. 

 (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless
sooner terminated by the Board pursuant to Section 2, the Plan shall automatically terminate on the day before the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board; or (ii) the date the Plan is
approved by the stockholders of the Company. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. 

  
 16. 

 (b) No Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant. 
  

	11.	 EFFECTIVE DATE OF PLAN.

 This Plan shall become effective on the Effective Date. 

 

	12.	 CHOICE OF LAW. 

The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without
regard to that state’s conflict of laws rules. 
 13. DEFINITIONS. As used in the Plan, the following definitions shall
apply to the capitalized terms indicated below: 
 (a) “Affiliate” means, at the time of determination, any
“parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or
“majority-owned subsidiary” status is determined within the foregoing definition. 
 (b) “Board”
means the Board of Directors of the Company. 
 (c) “Capitalization Adjustment” means any change that is made
in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or any similar
equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards No. 123 (revised). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a
Capitalization Adjustment. 
 (d) “Cause” shall have the meaning ascribed to such term in any written
agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term means with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s commission of
any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the
Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or
disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross negligence or willful misconduct in the performance of such Participant’s duties, including, but not limited to, acts of
insubordination or habitual neglect of duties after written notice to such Participant and the failure to cure the same within ten (10) days after receipt of such notice. The determination that a termination of the Participant’s Continuous
Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding
Stock Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose. 

  
 17. 

 (e) “Change in Control” means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the following events: 
 (i) any Exchange Act Person becomes
the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar
transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company; (B) on account of the acquisition of securities of the
Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through
the issuance of equity securities; or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a
result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding; provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of
voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur; 

(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving
Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; 

(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets
of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other
disposition; or 
 (iv) individuals who, on the date this Plan is adopted by the Board, are members of the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved
or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board. 

  
 18. 

 Notwithstanding the foregoing definition or any other provision of this Plan, (A) the
term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an
individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or
any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply. 
 (f)
“Code” means the Internal Revenue Code of 1986, as amended, as well as any applicable regulations and guidance thereunder. 

(g) “Committee” means a committee of one (1) or more Directors to whom authority has been delegated by the
Board in accordance with Section 2(c). 
 (h) “Common Stock” means the common stock of the Company. 

(i) “Company” means Aravive Biologics, Inc., a Delaware corporation. 

(j) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate
to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a
fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan. 

(k) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as
an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director, or Consultant or a change in the Entity for which the
Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity
for which a Participant is rendering service ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to
qualify as an Affiliate. For example, a change in status from an employee of the Company to a consultant of an Affiliate or to a Director shall not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or the
chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer,
including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of
vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law. 

  
 19. 

 (l) “Corporate Transaction” means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the following events: 
 (i) the consummation of a sale or
other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries; 

(ii) the consummation of a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company; 

(iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation;
or 
 (iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation
but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise. 
 (m) “Director” means a member of the Board. 

(n) “Disability” means the inability of a Participant to engage in any substantially gainful activity by reason
of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months as provided in Sections 22(e)(3) and
409A(a)(2)(c)(i) of the Code and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances. 

(o) “Effective Date” means the effective date of this Plan, which is the earlier of (i) the date that this
Plan is first approved by the Company’s stockholders, or (ii) the date this Plan is adopted by the Board. 
 (p)
“Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an
“Employee” for purposes of the Plan. 
 (q) “Entity” means a corporation, partnership,
limited liability company or other entity. 
 (r) “Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder. 
 (s) “Exchange Act Person” means any natural
person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company;
(ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities 

  
 20. 

 
under an employee benefit plan of the Company or any Subsidiary of the Company; (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such
securities; (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within
the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities. 
 (t) “Fair Market Value” means, as of any date, the value of the
Common Stock determined by the Board in compliance with Section 409A of the Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code. 

(u) “Incentive Stock Option” means an option that qualifies as an “incentive stock option” within the
meaning of Section 422 of the Code and the regulations promulgated thereunder. 
 (v) “Nonstatutory Stock
Option” means an Option that does not qualify as an Incentive Stock Option. 
 (w) “Officer”
means any person designated by the Company as an officer. 
 (x) “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan. 
 (y) “Option
Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 

(z) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such
other person who holds an outstanding Option. 
 (aa) “Own,” “Owned,”
“Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired
“Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to
direct the voting, with respect to such securities. 
 (bb) “Participant” means a person to whom a Stock Award
is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award. 
 (cc)
“Plan” means this Aravive Biologics, Inc. 2017 Equity Incentive Plan. 
 (dd) “Restricted Stock
Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a). 

(ee) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a
Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan. 

  
 21. 

 (ff) “Restricted Stock Unit Award” means a right to receive
shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b). 
 (gg) “Restricted
Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award
Agreement shall be subject to the terms and conditions of the Plan. 
 (hh) “Rule 405” means Rule 405
promulgated under the Securities Act. (ii) “Rule 701” means Rule 701 promulgated under the Securities Act. (jj) “Securities Act” means the Securities Act of 1933, as amended. 

(ii) “Rule 701” means Rule 701 promulgated under the Securities Act. 

(jj) “Securities Act” means the Securities Act of 1933, as amended. 

(kk) “Stock Appreciation Right” or “SAR” means a right to receive the appreciation on
Common Stock that is granted pursuant to the terms and conditions of Section 5. 
 (ll) “Stock Appreciation Right
Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the
terms and conditions of the Plan. 
 (mm) “Stock Award” means any right to receive Common Stock granted under
the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, or a Stock Appreciation Right. 

(nn) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the
terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 

(oo) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect
interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) . 

(pp) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate. 

  
 22.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00288-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00288-of-00352.parquet"}]]