UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
_____________________________
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report:
 
(Date of earliest event reported)
 
November 19, 2013
____________________________
 
GROWLIFE, INC.
(Exact name of registrant as specified in charter)
 
Delaware
(State or other Jurisdiction of Incorporation or Organization)

0-50385
(Commission File Number)
 
90-0821083
(IRS Employer Identification No.)
 
20301 Ventura Blvd, Suite 126
Woodland Hills, California 91364
(Address of Principal Executive Offices and zip code)
 

(800) 977-5255
(Registrant’s telephone
 
number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:
 
[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
 
 


 
 
Item 1.01.
Entry into a Material Definitive Agreement
 
Joint Venture Agreement

On November 19, 2013, GrowLife, Inc. (the “Company”) entered into a Joint Venture Agreement (the “Agreement”) with CANX USA LLC (“CANX”), a Nevada limited liability company.  Under the terms of the Agreement, the Company and CANX will form Organic Growth International, LLC (“OGI”), a Nevada limited liability company, for the purpose of expanding the Company’s operations in its current retail hydroponic businesses and in other synergistic business verticals and facilitating additional funding for commercially financeable transactions of up to $40,000,000.  In connection with the closing of the Agreement, CANX will provide funding in the amount of $1,300,000 for a GrowLife Infrastructure Funding Technology program transaction and has agreed to provide additional funding under a 7% Convertible Note instrument. The Company will initially own a non-dilutive forty five percent (45%) share of OGI and the Company may acquire a controlling share of OGI as provided in the Agreement.

The foregoing description of the Agreement is qualified by reference to the complete terms of such agreement, the form of which is included herewith as Exhibit 10.1 and incorporated herein by reference.

Warrant Agreement

In accordance with the Agreement, the Company and CANX entered into a Warrant Agreement whereby the Company delivered CANX 140,000,000 freely transferable, unrestricted warrants to purchase 140,000,000 shares of the Company's common stock, at a maximum strike price of $0.033 per share, par value $0.0001 per share.

Subject to the terms of the Agreement, the Company may issue an additional 100,000,000 freely transferable, unrestricted warrants to purchase 100,000,000 shares of the Company's common stock, par value $0.0001 per share, at a maximum strike price of $0.033 per share and twenty (20) blocks of warrants in the Company, with each block consisting of 10,000,000 freely transferable, unrestricted warrants to purchase 10,000,000 shares of the Company's common stock, at a maximum strike price of $0.033 per share, par value $0.0001.

The foregoing description of the Warrant Agreement is qualified by reference to the complete terms of such agreement, the form of which is included herewith as Exhibit 10.2 and incorporated herein by reference.

7% Convertible Note

In accordance with the Agreement, the Company has agreed to issue a 7% Note to CANX (the “Note”) in exchange for the principal amount of $1,000,000.  Per the terms of the Note, the maturity date is September 30, 2015, and the annual rate of interest is seven percent (7%), which increases to twenty-four percent (24%) per annum, or the maximum rate permitted under any applicable law, in the event of default. Subject to certain limitations, CANX can, at its sole discretion, convert the outstanding and unpaid principal and interest into fully paid and nonassessable shares of the Company’s common stock. The conversion price for the period of time from the date of the Note through and including September 30, 2014 is the lesser of (a) $0.025 per share and (b) seventy percent (70%) of the average of the three (3) lowest daily volume weighted average closing prices occurring during the twenty (20) consecutive trading days immediately preceding the applicable conversion date on which CANX elects to convert all or part of the Note, subject to adjustment as provided in the Note. The conversion price is $0.025 per share for the period of October 1, 2014 through the maturity date of September 30, 2015, subject to adjustment as provided in the Note. The Company is required to reserve, at all times, the full number of shares of common stock issuable upon conversion of all outstanding amounts under this Note.  At any time after the 12-month period immediately following the date of the Note, the Company has the option to pre-pay the entire outstanding principal amount of the Note by paying to CANX an amount equal to one hundred and fifty percent (150%) of the principal and interest then outstanding.  The Company’s obligations under the Note will accelerate upon a bankruptcy event with respect to the Company or any subsidiary, any default in the Company’s payment obligations under the Note, the Company’s failure to issue shares of its common stock in connection with a conversion of any of the Note, the Company’s or any subsidiary’s breach of any provision of any agreement providing for indebtedness of the Company or such subsidiary in an amount exceeding $100,000, the common stock of the Company being suspended or delisted from trading on the Over the Counter Bulletin Board (the “Primary Market”) market and the OTCQB, the Company losing its status as “DTC Eligible” or the Company becoming late or delinquent in its filing requirements with the Securities and Exchange Commission. Upon any such acceleration of the Note, the Company shall be obligated to pay an amount equal to the greater of (i) one hundred and twenty percent (120%) of the outstanding principal of the Note (plus all accrued but unpaid interest) and (ii) the product of (a) the highest closing price for the Company’s common stock for the five (5) days on which the Primary Market is open for business immediately preceding such acceleration and (b) a fraction, the numerator of which is the outstanding principal of the Note, and the denominator of which is the applicable conversion price as of the date of determination.
 
 
- 2 -

 

 
The foregoing description of the Note is qualified by reference to the complete terms of such agreement, the form of which is included herewith as Exhibit 10.3 and incorporated herein by reference.

Registration Rights Agreement

In accordance with the Agreement, the Company also entered into a Registration Rights Agreement with CANX whereby CANX has the right to demand that the Company prepare and file a Registration Statement on Form S-1 (or, if Form S-1 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of securities) covering the resale of warrants issued pursuant to the Warrant Agreement.

The foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the complete terms of such agreement, the form of which is included herewith as Exhibit 10.4 and incorporated herein by reference.

 
Item 2.03.
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
 
See the disclosures made in Item 1.01, which are incorporated herein by reference.
 

Item 3.02.
Unregistered Sales of Equity Securities
 
See the disclosures made in Item 1.01, which are incorporated herein by reference. The Company’s securities were issued to an accredited investor in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D. The transaction did not involve a public offering, the sale of the securities was made without general solicitation or advertising, there was no underwriter, and no underwriting commissions were paid.
 
 
Item 9.01.
Financial Statements and Exhibits
 
Exhibit 10.1
Joint Venture Agreement dated November 19, 2013, by and between GrowLife, Inc. and CANX USA LLC.
   
Exhibit 10.2
Warrant Agreement
   
Exhibit 10.3
7% Convertible Note
   
Exhibit 10.4
Registration Rights Agreement
 
 
- 3 -

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
GrowLife, Inc.
     
Date:  November 21, 2013
By:
/s/ Sterling C. Scott 
   
Sterling C. Scott
   
Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- 4 -
 


 
Exhibit 10.1
 

 
JOINT   VENTURE   AGREEMENT

 
THIS   JOINT   VENTURE   AGREEMENT , dated November 19, 2013 (the “Agreement”) is made and entered into, by and between GrowLife, Inc. (“GrowLife”), a Delaware corporation, and CANX USA  LLC,  a  Nevada  limited  liability,  and  its  designees  and  assignees  (“CANX”). GrowLife and CANX shall be collectively referred to herein as the “Parties.”

RECITALS
 
WHEREAS , GrowLife is in the business of selling hydroponic equipment, supplies and services through GrowLife’s physical retail locations, as well as its online stores.
 
WHEREAS , GrowLife and CANX desire to join in the formation of a joint venture for the purposes and on the terms set forth in this Agreement and its Exhibits attached hereto.
 
WHEREAS,   GrowLife and CANX shall form a Nevada limited liability company for purposes of this joint venture, which shall be named “Organic Growth International, LLC” (“OGI” or “Joint Venture”).  The Parties may, in their absolute and sole discretion, and in accordance with the terms of this Agreement, change the name of the Joint Venture at any time and from time to time.

NOW   THEREFORE , for and in consideration of the mutual covenants and promises herein contained, and intending to be legally bound hereby, the Parties hereto agree as follows:

AGREEMENT

1. 
Incorporation   of Recitals .      The Recitals are incorporated herein as if set forth in full and made a part of this Agreement.
 
2.          Exhibits .   The following exhibits attached hereto are incorporated herein and made a part hereof for all purposes:
 
EXHIBIT “A”
Warrant Agreement
   
EXHIBIT “B”
Convertible Note
   
EXHIBIT “C”
Registration Rights Agreement
 
3.          Organization .      The Parties agree to form a Joint Venture named Organic Growth International, LLC.  OGI will be organized as a Nevada limited liability company.  The Parties are not partners. Neither Party is or shall be responsible for the debts or liabilities of the other Party. Likewise, neither Party shall have, by virtue of this Agreement or otherwise, any ownership interest or rights in the other, or any right of interest in assets of the other except as specifically provided herein.
 
4.          Purpose .   OGI shall be formed for the purpose of expanding GrowLife operations in its current retail hydroponic businesses and in other synergistic business verticals, exclusive distribution of GrowLife products through OGI retail partnerships, including the distribution of GrowLife private labels, and for the Parties to participate in developments and investments in growing operations and end user outlets.  OGI may develop business opportunities directly or indirectly through subsidiary companies, joint ventures, partnerships, or other legal commercial structures. OGI may also engage in other activities that may be reasonably incident or appropriate to the foregoing as the Parties shall determine in accordance with the terms of this Agreement.
 
 
GrowLife-CANX JV Agmnt, Page 1

 
 
5.           Obligations .   The Parties hereto agree that they shall have the following responsibilities associated with OGI and this Joint Venture:
 
 
a. 
CANX /   OGI .
 
 
i.
Formation   and   Operation   of   OGI.   CANX will form OGI under the laws of the State of Nevada and will be in sole operational control of the entity except as specifically provided herein.   The initial allocation of ownership percentages shall be fifty-five percent (55%) to CANX and forty-five (45) percent to GrowLife non-dilutive, and subject to adjustment as provided in this Agreement.
 
 
ii.
Initial   Contribution,   Convertible   Note.    Concurrent with the execution and delivery of this Agreement by the Parties, CANX will immediately provide one million dollars ($1,000,000) to GrowLife (the “Initial Funding”) pursuant to a convertible note, the form of which is attached hereto as Exhibit B.
 
 
iii.
Consulting   Services.    CANX will provide OGI with executive level new business development, marketing, operational, private label and supply chain consulting services for a minimum term of thirty-six (36) months.
 
 
iv. 
GrowLife   Ownership   Interest   in   OGI.      The  Parties  contemplate  that GrowLife may ultimately acquire a fifty one (51%) ownership interest in OGI.  The Parties further contemplate that GrowLife’s ownership percentage in OGI will come in four phases.
 
 
1.
Phase   One:     Formation   and   Ownership .     In accordance with this Agreement, OGI shall be formed and constituted with a non-dilutive forty-five percent (45%) ownership by GrowLife.
 
 
2. 
Phase   Two:   Initial   Expansion   Activity .
 
 
a.
OGI agrees to facilitate through third party sources, members of OGI or CANX,  or  directly provide up  to  forty  million dollars ($40,000,000) in additional funding for commercially financeable transactions that are mutually approved by the Parties (“Transaction Financing”). All such transactions will fall within the scope of this Joint Venture, or otherwise as provided for under this Agreement. The Transaction Financing is subject to Phase Three below, including the implementation of the Minimum Increase of Authorized Shares (as defined below), or otherwise as the Parties may mutually agree.
 
 
GrowLife-CANX JV Agmnt, Page 2

 
 
 
b.
Concurrent with the execution of this Agreement, OGI will provide (as a part of the Transaction Financing) a funding commitment to GrowLife of one million three hundred thousand dollars ($1,300,000) (the “First Transaction Commitment”).  Subject to the approvals set forth in 2.a. above, GrowLife may use this First Transaction Commitment in connection with its GrowLife Infrastructure Finance Technology program.
 
 
c.
Concurrent with the execution of this Agreement, GrowLife agrees to deliver to CANX one hundred forty million (140,000,000) freely and fully transferrable, unrestricted warrants to purchase one hundred forty million (140,000,000) shares of GrowLife common stock, par value $0.0001 per share (“Common Stock”), at a maximum strike price of $0.033  per  share,  as described in  the  form  attached  as  Exhibit  A  (the “Initial Warrants”).
 
 
3.
Phase Three—Growth  Structuring . GrowLife currently has one billion (1,000,000,000) shares of Common Stock authorized.  Within fourteen (14) days of the effective date of this Agreement, GrowLife shall have made all necessary filings to process an amendment to its Certificate of Incorporation to increase in its authorized Common Stock sufficient to meet its obligations to CANX and OGI under this Joint Venture and its related acquisition and growth strategies (the “Minimum Increase of Authorized Shares”), to accommodate the activities contemplated under this Agreement, including, without limitation, the issuance of the Warrants and the Warrant Shares. Upon completion of any increase in GrowLife’s authorized stock, GrowLife will issue the following additional Warrants to CANX: (i) one hundred million (100,000,000) Warrants in GrowLife to purchase 100,000,000 shares of Common Stock at a maximum strike price of $0.033 per share ,   and (ii) twenty (20) blocks of Warrants in GrowLife, with each block consisting of 10,000,000 Warrants to purchase 10,000,000 shares of Common Stock at a maximum strike price of $0.033 per share.
 
 
GrowLife-CANX JV Agmnt, Page 3

 
 
Each block of Warrants will be fully earned by and issued to CANX in stages as CANX raises capital or acquires assets to be deployed in OGI (or indirectly through third parties, subsidiary companies, joint ventures, partnerships, or other legal commercial structures), with each 10,000,000 block of Warrants issued upon each additional  one  million  dollars  ($1,000,000) of capital or assets raised and/or placed in OGI. The Warrant Agreement for Phase Three is attached as Exhibit A.
 
 
4.
Phase   Four:   OGI Control   Transfer . Upon OGI deriving eighty million dollars ($80,000,000) in gross revenue from OGI acquisitions that have been approved by the Parties, or completing forty million dollars ($40,000,000) in acquisitions (measured by gross purchase price consideration),  GrowLife will issue additional Warrants to CANX to allow the purchase of additional Common Stock, at a maximum strike price of $0.033 per share, in an amount necessary to equal a total of forty nine percent (49%) of GrowLife‘s issued and outstanding capital stock, on a fully diluted basis, giving effect to the issuance and accounting for all prior Warrants earned by CANX, less eighty (80) million warrants from the Initial Warrants described in 2.c. above (the “Top Up Warrants”). Concurrently and expressly subject to the foregoing, OGI will issue equity in OGI to GrowLife in an amount sufficient to increase GrowLife’s total  equity  ownership  in  OGI  to  fifty one percent (51%) of the issued and outstanding equity ownership in OGI. For every additional one million dollars ($1,000,000) in new revenue generated/acquired by OGI beyond eighty million dollars ($80,000,000) in gross revenue, CANX will be awarded five hundred thousand (500,000) additional Warrants to purchase Common Stock at a maximum strike price of $.033 per share, capped at a maximum of fifty million (50,000,000) Warrants.
 
 
5.
Warrants   and   Share/Securities   Defined/adjustments.     All warrants granted to CANX to purchase GrowLife Common Stock referenced herein are collectively referred to herein as “Warrants” or “CANX Warrants.”  The Common Stock  issuable  upon  exercise  of  the Warrants are referred to as “Underlying Shares” or “Warrant Shares,” and collectively the Warrants, the CANX Warrants and the Warrant Shares are also referred to herein collectively as the “Securities”.
 
 
6.
Registration   Rights.    CANX shall be entitled to  registration rights for the Securities, as contained in the Registration Rights Agreement, attached hereto as Exhibit C.
 
 
v.
OGI   Board   Appointment.   Concurrent with the execution and delivery of this Agreement by the Parties and the formation of OGI, OGI shall grant GrowLife the right to appoint one (1) member to the OGI board of directors/managers.
 
 
GrowLife-CANX JV Agmnt, Page 4

 
 
 
vi.
GrowLife   Participation   in   OGI   New   Business.   OGI intends to develop and grow operations and end user outlets in the industry in which GrowLife presently operates (“OGI New Business”).  To that end, OGI shall grant GrowLife a right of first refusal to increase its ownership in OGI New Business on an acquisition-by-acquisition basis beyond its pro-rata ownership of OGI.   GrowLife, in its sole discretion, may exercise this option to participate in individual OGI New Business acquisitions at a price equal to the price of the acquisition.
 
 
vii. 
OGI   Management   and   Operational   Services. Through its majority control of the board of managers/directors of OGI, CANX shall have the absolute right to direct and shall be responsible for the day to day operations of OGI.  OGI will use its commercially reasonably efforts to develop a market analysis, marketing plan and operational plan for OGI and all OGI New Business. OGI may, subject to the mutual approval of the Parties, prepare a private placement memorandum (“PPM”) for use in connection with the Transaction Financing.  GrowLife, as reasonably requested by OGI, will fully cooperate with, and timely provide any and all information to OGI (or CANX, as the case may be) as may be required by OGI or CANX for PPM, and the Transaction Financing, or otherwise under the activities contemplated by this agreement, and as may necessary or advisable relative to OGI’s  business and operations (this duty to fully cooperate shall be an express condition to OGI’s obligations hereunder).
 
 
viii. 
Operation   of   Existing   GrowLife   Operations.   It is the understanding of the Parties that initially the day-to-day operational management of existing GrowLife “Brick and Mortar” retail stores and online businesses (“GrowLife Operations”) will remain under the operational control of GrowLife subject to consultation by CANX and OGI, on a reasonable basis.   It is further understood that existing GrowLife Operations may eventually be installed on the OGI operational platform pursuant to a definitive agreement mutually agreed to by the Parties.   All revenues, costs, profits and liabilities generated by GrowLife Operations will remain owned by and the sole responsibility of GrowLife.   OGI will have no right to direct or control the management of GrowLife, or any right, title or interest in GrowLife, GrowLife Operations and/or the proceeds therefrom, except as otherwise expressly provided in this Agreement.
 
 
ix. 
OGI   Purchase   of   GrowLife   Goods   and   Services.   OGI shall cause each and every OGI New Business to purchase, to the extent possible and reasonable, all of its goods and services for resale to its customers from GrowLife on an exclusive  basis,  provided  however  that  GrowLife  has  the  capability  to provide such goods and services and that such goods and services are competitively priced.
 
 
x.
OGI   Usage   of   GrowLife   Private   Label   Goods.    OGI shall use, on a first available  basis,  to  the  extent  possible  and  reasonable,  all  goods  made available to it by GrowLife that are GrowLife private label branded.
 
 
GrowLife-CANX JV Agmnt, Page 5

 
 
 
xi. 
OGI   Sale,   Issuance   or   Hypothecation   of   Ownership   Interest.   OGI shall not sell, issue, or hypothecate the portion of its membership units that may be acquired by GrowLife under this Joint Venture without prior consent of GrowLife, provided that consent by GrowLife if requested shall not unreasonably be refused.
 
 
xii.
Intentionally deleted.

 
xiii. 
Change   in Control   of   OGI.   In the event that GrowLife acquires control of the voting equity of OGI, then the minority members of OGI shall have the right to appoint one (1) member to the OGI board of directors/managers (the “Minority Director”). The Minority Director shall be vested with the rights and powers of the OGI Director (including, without limitation, the right to approve (or deny, as the case may be) the sale, issuance or hypothecation of the GL Shares), in addition to the rights it has as a director generally and otherwise.
 
 
b. 
GrowLife.
 
 
i.
GrowLife   Not   Obligated   to   Contribute   Capital.   GrowLife has no obligation to contribute any capital or monies to OGI.   However, GrowLife does have the option to participate in OGI New Business on an acquisition-by-acquisition basis subject the Parties mutual agreement.
 
 
ii.
GrowLife   Will   Not   Participate   in   Operation   of   OGI.     GrowLife will  not participate in the operation or control of OGI, provided however, concurrent with the execution and delivery of this Agreement by the Parties GrowLife grants OGI the right to make appointments of members to GrowLife’s Board of Directors as described in iii.
 
 
iii.
GrowLife   Board   Appointment .  Concurrent with the execution and delivery of this Agreement by the Parties, GrowLife grants OGI the right to appoint three (3) members to the GrowLife board of directors (“OGI Director(s)”). GrowLife will maintain a seven (7) member board of directors, inclusive of the OGI Directors, unless a super majority consisting of eighty (80%) of the GrowLife board of directors vote in favor of adjusting the number of the GrowLife board of director members.
 
 
iv.
Non-Exclusive GrowLife Intellectual Property License .  Concurrent with the execution and delivery of this Agreement by the Parties, GrowLife grants OGI a non-exclusive right to use its intellectual property in its business operations (excluding Stealth Grow LED), including without limitation, GrowLife and GrowLife controlled trade names and trademarks, for the benefit of GrowLife and subject to prior approval in writing of matters affecting the form or style of GrowLife brands.   This form of this agreement shall be on customary, commercially reasonable terms, to be negotiated in good faith by the Parties.
 
 
v.
OGI   Approval   of   Successor   CEOs   and   Presidents.    GrowLife grants OGI the right to nominate successor CEOs of GrowLife in the event that the current CEO of GrowLife, is no longer an officer of GrowLife either by expiration or termination of his Executive Employment Agreement incorporated herein by reference.  This form of this  agreement  shall  be  on  customary, commercially reasonable terms, to be negotiated in good faith by the Parties.
 
 
GrowLife-CANX JV Agmnt, Page 6

 
 
6.           Operation   and   Control .   OGI will be formed, managed, operated and controlled by CANX and/or its affiliates as designated by CANX.  Subject to any specific provisions of this Agreement to the contrary, CANX shall be solely responsible for the management of OGI business and shall have all rights and powers generally conferred by law or necessary, advisable or consistent in connection with those rights and powers, or in connection with accomplishing the purposes of the Joint Venture as set forth in this Agreement.
 
7.            Term .   Except as otherwise provided in this Agreement and its Exhibits, the Joint Venture shall commence as of the effective date of this Agreement and shall continue for three (3) years from the date of execution, unless sooner terminated pursuant to the provisions of this Agreement, by mutual agreement of the Parties, or by operation of law.
 
8.            Representations   and   Warranties   of   GrowLife . In order to induce CANX to enter into this Agreement and to acquire the CANX Warrants, GrowLife hereby makes the following representations and warranties to CANX and the Placement Agent, as applicable:
 
 
a.
Underlying Shares   and   Warrant   Shares .  GrowLife has authorized (or will authorize) and has reserved (or will reserve) and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a number of its authorized but unissued shares of Common Stock equal to the aggregate number of shares of Common Stock necessary to effect the exercise of the CANX Warrants.
 
 
b.
Organization,   Good   Standing   and   Power .     GrowLife  is  a  corporation  duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  GrowLife is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so  qualified will not have a Material Adverse Effect.  For the purposes of this Agreement, “Material Adverse Effect” means any adverse effect on the business, operations, properties, prospects or financial condition of GrowLife which is material to such entity or other entities controlling or controlled by such entity or which is likely to materially affect GrowLife’s business or hinder the performance by GrowLife of its material obligations hereunder and under the other Transaction Documents.  “Transaction Documents” shall mean this Agreement, and all of the documents contemplated by this Agreement, including, without limitation, the Convertible Note, the Warrant Agreement, and the Registration Rights Agreement).
 
 
GrowLife-CANX JV Agmnt, Page 7

 
 
 
c.
Authorization; Enforcement .    GrowLife  has  the  requisite  corporate  power  and authority to enter into and perform its obligations under the Transaction Documents and  to  issue  the  CANX  Warrants  in  accordance  with  the  terms  hereof.    Upon approval and ratification by the Board of Directors of GrowLife, and the execution, delivery and performance of the Transaction Documents by GrowLife no further consent or authorization of GrowLife, GrowLife’s board of directors (the “Board of Directors”) or its stockholders is required. This Agreement has been duly executed and delivered by GrowLife.   Each of the Transaction Documents constitutes, or shall constitute when executed  and  delivered,  a  valid  and  binding  obligation  of  GrowLife enforceable against GrowLife in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.
 
 
d.
Capitalization .   The authorized capital stock of GrowLife and the shares thereof issued and outstanding as of 19, 2013, are set forth on Schedule 8(d) hereto.  All of the outstanding shares of GrowLife’s Common Stock and any other security of GrowLife have been duly and validly authorized.  Except as set forth on Schedule 8(d) hereto, no shares of Common Stock or any other security of GrowLife are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of GrowLife.  Furthermore, except as set forth on Schedule   8(d) hereto, there are no contracts, commitments, understandings, or arrangements by which GrowLife is or may become bound to issue additional shares of the capital stock of GrowLife or options, securities or rights convertible into shares of capital stock of GrowLife. Except for customary transfer restrictions contained in agreements entered into by GrowLife in order to sell restricted securities or as provided on Schedule   8(d) hereto, GrowLife is not a party to or bound by any agreement or understanding granting registration or anti-dilution rights to any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind (each, a “Person”) with respect to any of its equity or debt securities.  GrowLife is not a party to, and it has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of GrowLife. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of GrowLife issued prior to the Closing complied with all applicable federal and state securities laws, and no holder of such securities has a right of rescission or claim for damages with respect thereto which could have a Material Adverse Effect. GrowLife has furnished or made available to CANX true and correct copies of GrowLife’s Articles of Incorporation as amended and restated and in effect on the effective date of this Agreement (the “Articles”), and GrowLife’s Bylaws as in effect effective date of this Agreement (the “Bylaws”).
 
 
GrowLife-CANX JV Agmnt, Page 8

 
 
 
e.
Issuance   of   Securities .  The CANX Warrants to be issued hereunder have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, and shall be validly issued and outstanding, fully paid and nonassessable and free and clear of all liens, encumbrances and rights of refusal of any kind and the holders shall be entitled to all rights accorded to a holder of Common Stock.  The Warrant Shares to be issued upon exercise of the CANX Warrants have been duly authorized by all necessary corporate action and when issued and paid for in accordance with the terms of this Agreement and as set forth in the CANX Warrants, as applicable, such shares will be validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of refusal of any kind and the holders shall be entitled to all rights accorded to a holder of Common Stock.
 
 
f.
No   Conflicts .     The  execution,  delivery  and  performance  of  the  Transaction Documents by GrowLife and the consummation by GrowLife of the transactions contemplated hereby and thereby do not and will not (i) violate any provision of the Articles or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which GrowLife is a party or by which GrowLife’s respective properties or  assets are bound,  (iii) create or  impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property or asset of GrowLife under any agreement or any commitment to which GrowLife is a party or by which GrowLife is bound or by which any of their respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to GrowLife  or by which any property or asset of GrowLife is bound or affected, except, in all cases other than violations pursuant to clauses (i) or (iv) (with respect to federal and state securities laws) above, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of GrowLife is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which singularly or in the aggregate do not and will not have a Material Adverse Effect. GrowLife is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents or issue and sell the Securities in accordance with the terms hereof or thereof (other than any filings which may be required to be made by GrowLife with the Securities and Exchange Commission (the “Commission”) and/or FINRA prior to or subsequent to the Effective date of this Agreement, or state securities administrators subsequent to the Effective date of this Agreement, or any registration statement which may be filed pursuant hereto or thereto).
 
 
GrowLife-CANX JV Agmnt, Page 9

 
 
 
g.
Commission   Documents;   Financial   Statements .   GrowLife has made available to CANX through the EDGAR system, true and complete copies of GrowLife’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the “ Form   10-K ”), and all other reports, schedules, forms, statements and other documents required to be filed by GrowLife pursuant to the Securities Act and the Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) thereof, since December 31, 2012 (all of the foregoing, including filings incorporated by reference therein, being referred to herein as the “Commission Documents”). GrowLife has not provided to CANX any material non- public information or other information which, according to applicable law, rule or regulation, should have been disclosed publicly by GrowLife but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement.  At the time of their filing, other than the timeliness of the filings, each Commission Document complied in all material respects with the requirements of the Securities Act or Exchange Act, as applicable, and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and, at the time of its filing, each Commission Document did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of GrowLife  included  in  the  Commission  Documents  complied  as  to  form  in  all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during  the  periods  involved  (except  (i)  as  may  be  otherwise  indicated  in  such financial statements or the Notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of GrowLife and its subsidiary as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).
 
 
h.
No   Material   Adverse   Change .  Since June 30, 2013, GrowLife has not experienced or suffered any Material Adverse Effect.
 
 
i.
No   Undisclosed   Liabilities .  GrowLife has not incurred any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those set forth in the Commission Documents or incurred in the ordinary course of GrowLife’s business since June 30, 2013, and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on GrowLife.
    
 
GrowLife-CANX JV Agmnt, Page 10

 
 
 
j.
No   Undisclosed   Events   or   Circumstances .  Since June 30, 2013, except as disclosed in the Commission Documents filed prior to the date hereof, (i) to GrowLife’s knowledge, there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) GrowLife has  not  incurred  any  liabilities  (contingent  or  otherwise)  other  than  (A)  trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in GrowLife’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) GrowLife has not altered its method of accounting, (iv) GrowLife has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) GrowLife has not issued any equity securities to any officer, director or affiliate, except pursuant to any existing Company stock option plans.  GrowLife does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to GrowLife or its subsidiary or their respective businesses, properties, operations, assets or financial condition that would be required to be disclosed by GrowLife under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) trading day prior to the date that this representation is made.
 
 
k.
Title   to   Assets .   GrowLife has good  and marketable title to all of  its personal property, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances of any nature whatsoever, except for those that, individually or in the aggregate, do not have a Material Adverse Effect Except or as set forth on Schedule 8(k) attached hereto.  All said leases of GrowLife are valid and subsisting and in full force and effect. GrowLife does not own any real property.
 
 
l.
Actions   Pending .  There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of GrowLife, threatened, against GrowLife which questions the validity of this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto. Except as disclosed in the Commission Documents, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding  pending  or,  to  the  knowledge  of  GrowLife, threatened  against  or involving  GrowLife  or   any   of   their  respective  properties  or   assets,  which individually or in the aggregate, would have a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against GrowLife or any officers or directors of GrowLife in their capacities as such, which individually, or in the aggregate, would have a Material Adverse Effect.
 
 
GrowLife-CANX JV Agmnt, Page 11

 
 
 
m.
Compliance   with   Law .  The business of GrowLife has been and is presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except as set forth in the Commission Documents or such that, individually or in the aggregate, the noncompliance therewith would not have a Material Adverse Effect.  GrowLife has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
 
 
n.
Taxes .  GrowLife has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of GrowLife for all current taxes and other charges to which GrowLife is subject and which are not currently due and payable.  None of the federal income tax returns of GrowLife have been audited by the Internal Revenue Service. GrowLife has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against GrowLife for any period, nor of any basis for any such assessment, adjustment or contingency.
 
 
o.
Certain   Fees .   GrowLife has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Transaction Documents.
 
 
p.
Disclosure .    Except  with  respect  to  the  material  terms  and  conditions  of  the transactions contemplated by the Transaction Documents, GrowLife confirms that neither it nor any other Person acting on its behalf has provided any of CANX or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Commission Documents.  GrowLife understands and confirms that CANX will rely on the foregoing representation in effecting transactions in securities of GrowLife. All of the disclosure furnished by or on behalf of GrowLife to CANX regarding GrowLife and its subsidiaries, their respective businesses and the transactions contemplated hereby, including any disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. GrowLife acknowledges and agrees that CANX makes no nor has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in herein.
 
 
GrowLife-CANX JV Agmnt, Page 12

 
 
 
q.
Intellectual   Property .   GrowLife and its subsidiary have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with its current business as described in the Commission Documents (collectively, the “ I ntellectual Property Rights”). Neither GrowLife nor its subsidiary has received a notice (written or otherwise) that any of the material Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the effective date of this Agreement.  Neither GrowLife nor any of its subsidiaries has received, since the date of the latest audited financial statements included within the Commission Documents, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person.  To the knowledge of GrowLife, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.   GrowLife and its subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties.
 
 
r.
Books   and   Records;   Sarbanes-Oxley;   Internal   Accounting   Controls .   The books, records and documents of GrowLife accurately reflect in all material respects the information relating to the business of GrowLife, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable  of  GrowLife.    GrowLife maintains  a  system  of  internal  accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. GrowLife and its subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for GrowLife and its subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by GrowLife in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  GrowLife’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of GrowLife and its subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  GrowLife presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the weaknesses of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of GrowLife that have adversely affected, or is reasonably likely to adversely affect, the internal control over financial reporting of GrowLife.
 
 
GrowLife-CANX JV Agmnt, Page 13

 
 
 
s.
Material   Agreements .   Except for the Transaction Documents or as included as exhibits to the Commission Documents, GrowLife is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission (collectively, “Material Agreements”) if GrowLife was registering securities under the Securities Act.  GrowLife has in all material respects performed all the obligations required to be performed by it to date under the foregoing agreements, and GrowLife has not a notice of default and, to the best of GrowLife’s knowledge, it is not in default under any Material Agreement now in effect, the result of which could cause a Material Adverse Effect.
 
 
t.
Securities   Act   of   1933 .  GrowLife has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Securities hereunder. Neither GrowLife nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Securities, or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any Person, or has taken or will take any action so as to bring the issuance and sale of any of the Securities under the registration provisions of the Securities Act and applicable state securities laws.  Neither GrowLife nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Securities.
 
 
u.
Governmental   Approvals .  Except for the filing of any notice prior or subsequent to the effective date of this Agreement that may be required under applicable state and/or federal securities laws (which if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the CANX Warrants, the Warrant Shares, or for the performance by GrowLife of its obligations under the Transaction Documents.
 
 
v.
Application   of   Takeover   Protections .   GrowLife and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under GrowLife’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to CANX as a result of CANX and GrowLife fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of GrowLife’s issuance of the Securities and CANX’ ownership of the Securities.
 
 
GrowLife-CANX JV Agmnt, Page 14

 
 
 
w.
Foreign   Corrupt   Practices.    Neither GrowLife nor to the knowledge of GrowLife, any agent or other Person acting  on behalf of  GrowLife,  has: (i)  directly  or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by GrowLife (or made by any Person acting on its behalf of which GrowLife is aware) which is in violation of law or (iv) violated in any material respect any provision of Foreign Corrupt Practices Act of 1977, as amended.
 
 
x.
No   Disagreements   with   Accountants .   There are  no  disagreements of  any  kind presently existing between GrowLife and the accountants formerly or presently employed by GrowLife.
 
 
y.
Acknowledgment     Regarding      CANX’s      acquisition      of      Securities . GrowLife acknowledges and agrees that CANX is acting solely in the capacity of an arm’s length party with respect to the Transaction Documents and the transactions contemplated thereby. GrowLife further acknowledges CANX is not acting as a financial advisor or fiduciary of GrowLife (or in any similar capacity) with respect to the  Transaction  Documents  and  the  transactions  contemplated  thereby  and  any advice given by CANX or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to this Agreement.  GrowLife further represents to CANX  that  GrowLife’s  decision  to  enter  into  this  Agreement  and  the  other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by GrowLife and its representatives.
 
 
z.
Investment   Company   Act   Status .  GrowLife is not, and as a result of and as of the effective date of this Agreement will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
 
 
aa.
Absence   of   Manipulation .  GrowLife has not, and to GrowLife’s knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of GrowLife to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the securities of GrowLife or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of GrowLife, in connection with the issuance of the Securities.
 
 
bb.
Office   of   Foreign   Assets   Control .  Neither GrowLife nor, to GrowLife's knowledge, any director, officer, agent, employee or affiliate of GrowLife is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
 
 
GrowLife-CANX JV Agmnt, Page 15

 
 
 
cc.
U.S.   Real   Property Holding   Corporation . GrowLife is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and GrowLife shall so certify upon CANX’s request.
 
 
dd.
Money   Laundering . The operations of GrowLife are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator  involving  GrowLife  with  respect  to  the  Money  Laundering  Laws  is pending or, to the knowledge of GrowLife, threatened.
 
 
ee.
Acknowledgement   Regarding   CANX’s     Trading     Activity .      Anything   in   this Agreement or elsewhere herein to the contrary notwithstanding, it is understood and acknowledged by GrowLife that: (i) none of CANX has been asked by GrowLife to agree, nor has CANX agreed, to desist from purchasing or selling, long and/or short, securities of GrowLife, or “derivative” securities based on securities issued by GrowLife or to hold the Securities for any specified term; (ii) past or future open market or other transactions by CANX, specifically including, without limitation, short sales or “derivative” transactions, before or after the effective date of this Agreement of this or future private placement transactions, may negatively impact the market price of GrowLife’s publicly-traded securities; (iii) CANX, and counter- parties in “derivative” transactions to which CANX is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) CANX shall not be deemed to have any affiliation with or control over any arm’s length counter- party in any “derivative” transaction. GrowLife further understands and acknowledges that (y) CANX may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in GrowLife at and after the time that the hedging activities are being conducted.  GrowLife acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
 
 
ff.
Regulatory Permits . GrowLife and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to for their respective businesses as currently conducted and as described in the Commission Documents, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse  Effect  (“Material  Permits”),  and  neither  GrowLife  nor  any  of  its subsidiaries has received any notice of proceedings relating to the revocation or modification of any Material Permit.
 
 
GrowLife-CANX JV Agmnt, Page 16

 
 
 
gg.
Labor   Relations .  No material labor dispute exists or, to the knowledge of GrowLife, is imminent with respect to any of the employees of GrowLife, which could reasonably be expected to result in a Material Adverse Effect.  None of GrowLife’s or its subsidiaries’ employees is a member of a union that relates to such employee’s relationship with GrowLife or such subsidiary, and neither GrowLife nor any of its subsidiaries is a party to a collective bargaining agreement, and GrowLife and its subsidiaries believe that their relationships with their employees are good.  To the knowledge of GrowLife, no executive officer of GrowLife or any of its subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non- competition  agreement,  or  any  other  contract  or  agreement  or  any  restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject GrowLife or any of its subsidiaries to any liability with respect to any of the foregoing matters.  GrowLife and its subsidiaries are in compliance with all United States. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
 
hh.
No   Disqualification   Events .    None  of  GrowLife,  any  of  its  predecessors,  any affiliated issuer, any director, executive officer, other officer of GrowLife participating in the offering, any beneficial owner of 20% or more of GrowLife’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with GrowLife in any capacity at the time of sale (each, a "Company Covered Person" and, together, "Company Covered Persons") is subject to any of the "Bad Actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a "Disqualification Event"), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). GrowLife has exercised reasonable care to determine whether any Company Covered Person is subject to a Disqualification Event.  GrowLife has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Placement Agent a copy of any disclosures provided thereunder.
   
 
ii.
Notice   of   Disqualification   Events .  GrowLife will notify CANX in writing, prior to the effective date of this Agreement of (i) any Disqualification Event relating to any Company Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Company Covered Person.
 
 
GrowLife-CANX JV Agmnt, Page 17

 
 
9.           Representations   and   Warranties   of   CANX .  CANX  hereby  makes  the  following representations and warranties to GrowLife:
 
 
a.
Organization   and   Standing   of   CANX .   CANX is a limited liability company duly incorporated or organized, validly existing and in good standing under the laws of the State of Nevada.
 
 
b.
Authorization   and   Power .  CANX has the requisite power and authority to enter into and perform the Transaction Documents and to acquire the CANX Warrants being issued to it hereunder. The execution, delivery and performance of the Transaction Documents by CANX and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of CANX or its Board of Directors, stockholders, or partners, as the case may be, is required. This Agreement has been duly  authorized,  executed  and   delivered  by   CANX.   The  other  Transaction Documents constitute, or shall constitute when executed and delivered, valid and binding obligations of CANX enforceable against CANX in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application. 
 
 
c.
Acquisition   for   Investment .  CANX is acquiring the CANX Warrants solely for its own account for the purpose of investment and not with a view to or for sale in connection with the distribution thereof. CANX does not have a present intention to sell any of the Securities, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Securities to or through any Person. CANX acknowledges that it (i) has such knowledge and experience in financial and business matters such that CANX is capable of evaluating the merits and risks of its investment in GrowLife, (ii) is able to bear the financial risks associated with an investment in the Securities, and (iii) has been given full access to such records of GrowLife and to the officers of GrowLife as it has deemed necessary or appropriate to conduct its due diligence investigation.
 
 
d.
General .    CANX  understands that  the  Securities are  being  offered  and  sold  in reliance on a transactional exemption from the registration requirements of United States federal and state securities laws and GrowLife is relying in part upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and  understandings of CANX set forth herein in order to determine the availability of such exemptions and the suitability of CANX to acquire the Securities. CANX  understands that no United States federal or state agency or any government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. 

 
e. 
Experience   of   CANX;   Independent   Investment   Decision .    CANX, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.   CANX  is able to bear the economic risk of  an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. 
 
 
GrowLife-CANX JV Agmnt, Page 18

 
 
 
f. 
No   General   Solicitation .  CANX acknowledges that the Securities were not offered to CANX  by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any  advertisement,  article,  notice  or  other  communication  published  in  any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which CANX was invited by any of the foregoing means of communications. 
 
 
g. 
Accredited   Investor . At the time CANX was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises CANX Warrants it will be, an “accredited investor” as defined in Rule 501(a) under the Securities Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
CANX is not a registered broker-dealer under Section 15 of the Exchange Act.CANX has such experience in business and financial matters that it is capable of evaluating  the  merits  and  risks  of  an  investment  in  the  Securities.  CANX acknowledges that an investment in the Securities is speculative and involves a high degree of risk.
 
10.        Covenants of Growlife.   GrowLife covenants with CANX as follows, which covenants are for the benefit of CANX and its respective permitted assignees.
 
 
a.
Securities   Compliance .  GrowLife shall notify the Commission, in accordance with its rules and regulations, of the transactions contemplated by any of the Transaction Documents, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to CANX, or their respective subsequent holders.
 
 
b.
Listing   of   Common   Stock . GrowLife hereby agrees to use best efforts to maintain the listing or quotation of the Common Stock on the OTC Markets or such other market on which it is currently listed, and if required, on the date of the issuance of the Securities, GrowLife shall apply to list or quote all of the Underlying Shares and Warrant Shares on such trading market and promptly secure the listing of all of the
 
Underlying Shares and Warrant Shares on such trading market. GrowLife further agrees, if GrowLife applies to have the Common Stock traded on any other trading market, it will then include in such application all of the Underlying Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Underlying Shares and Warrant Shares to be listed or quoted on such other trading market as promptly as possible.   GrowLife will then take all action reasonably necessary to continue the listing or quotation and trading of its Common Stock on a trading market and will comply in all respects with GrowLife’s reporting, filing and other obligations under the bylaws or rules of the trading market.
 
 
GrowLife-CANX JV Agmnt, Page 19

 
 
 
c.
Keeping   of   Records   and   Books   of   Account .  GrowLife shall keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of GrowLife, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.
 
 
d.
Reservation   of   Shares   of   Common   Stock .  So long as the Shares or Warrants remain outstanding, GrowLife shall take all action necessary to at all times have authorized, and  reserved  for  the  purpose  of  issuance,  the  maximum  number  of  shares  of Common Stock to effect the exercise of the Warrants.
 
 
e.
Disclosure   of   Transactions   and   Other   Material   Information .  On or before 8:30 a.m., New York City time, on the third Business Day immediately following the effective date of this Agreement, GrowLife shall file a Current Report on Form 8-K (including all attachments, the “8-K Filing”) with the Commission describing the terms of the transactions contemplated by the Transaction Documents and including as exhibits to such Current Report on Form 8-K this Agreement, the Warrants and the Registration Rights Agreement, and the schedules hereto and thereto in the form required by the Exchange Act.  As of the time of the filing of the 8-K Filing with the Commission, CANX shall not be in possession of any material, nonpublic information received from GrowLife or any of their respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. GrowLife shall not, and shall cause each of its respective officers, directors, employees and agents not to, provide CANX with any material, nonpublic information regarding GrowLife from and after the filing of the 8-K Filing with GrowLife without the express written consent of CANX.  Subject to the foregoing, neither GrowLife nor CANX shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided , however , that GrowLife shall be entitled, without the prior approval of CANX, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith, and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) above CANX shall be notified by GrowLife (although the consent of CANX shall not be required) in connection with any such press release or other public disclosure prior to its release).
 
 
f.
Acknowledgment   of   Dilution .   GrowLife acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. GrowLife further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Shares, the Underlying Shares and Warrant Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim GrowLife may have against CANX and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of GrowLife.
 
 
g.
Form   D;   Blue   Sky   Filings .  GrowLife agrees to timely file a Form D with respect to the  Securities  as  required  under  Regulation  D  and  to  provide  a  copy  thereof, promptly upon request of CANX.  GrowLife shall take such action as GrowLife shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, issuance to CANX under applicable securities or “Blue Sky” laws of  the states of  the  United States, and shall provide evidence of such actions promptly upon request of CANX.
 
 
GrowLife-CANX JV Agmnt, Page 20

 
 
 
h.
Furnishing   of   Information;   Public   Information .   Until the later of the time that (i) CANX owns no Securities or (ii) the Warrants have expired, GrowLife covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by GrowLife after the date hereof pursuant to the Exchange Act even if GrowLife is not then subject to the reporting requirements of the Exchange Act.
 
At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Securities may be sold without the requirement for GrowLife to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144. If GrowLife shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”). Nothing herein shall limit CANX’s right to pursue actual damages for the Public Information Failure, and CANX shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
 
 
i.
Subsequent   Equity   Sales .  Intentionally deleted.

 
j.
Conversion   and Exercise   Procedures .    Each of  the  form  of  Notice  of  Exercise included in the Warrants sets forth the totality of the procedures required of CANX in order to exercise the Warrants.  No additional legal opinion, other information or instructions shall be required of CANX to exercise or sell their Warrants.  GrowLife shall honor exercises and sales of the Warrants and shall deliver Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
 
11.          Conditions   Precedent   to   the   Obligations   of   GrowLife .   The obligation hereunder of GrowLife to issue the Warrants to CANX on the effective date of this Agreement, and perform its other obligations under this Agreement is subject to the satisfaction or waiver, at or before the effective date of this Agreement, of the conditions set forth below. These conditions are for GrowLife’s sole benefit and may be waived by GrowLife at any time in its sole discretion.
 
 
a.
Accuracy   of   CANX’s   Representations   and   Warranties .   The representations and warranties of CANX shall be true and correct in all material respects as of the date when made and as of the effective date of this Agreement as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.
 
 
b.
Performance   by   CANX .  CANX shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by CANX at or prior to the effective date of this Agreement.
 
 
c.
No   Injunction .    No  statute,  rule,  regulation,  executive  order,  decree,  ruling  or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.
 
 
GrowLife-CANX JV Agmnt, Page 21

 
 
 
d.
Delivery   of   Transaction   Documents . The Transaction Documents to which CANX is a party shall have been duly executed and delivered by CANX to GrowLife.
 
12.         Conditions   Precedent   to   the   Obligations   of   CANX .  The obligations of CANX hereunder to consummate the transactions contemplated by this Agreement and perform its obligations hereunder is subject to the satisfaction or waiver, at or before the effective date of this Agreement, of each of the conditions set forth below. These conditions are for CANX’ sole benefit and may be waived by CANX at any time in their sole discretion.
 
 
a.
Accuracy   of   GrowLife’s   Representations   and Warranties . Each of the representations and warranties of GrowLife in the Transaction Documents shall be true and correct in all material respects as of the effective date of this Agreement, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date.
 
 
b.
Performance   by   GrowLife .  GrowLife shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by GrowLife at or prior to the effective date of this Agreement.
 
 
c.
No   Suspension,   Etc.   Trading in the Common Stock shall not have been suspended by the Commission (except for any suspension of trading of limited duration agreed to by GrowLife, which suspension shall be terminated prior to the effective date of this Agreement), and, at any time prior to the effective date of this Agreement, trading in securities generally as reported by Bloomberg L.P. (“Bloomberg”) shall not have been suspended or limited, or minimum prices shall not have been established  on  securities  whose  trades  are  reported  by  Bloomberg,  nor  shall  a banking moratorium have been declared either by the United States or Nevada State authorities, nor shall there have occurred any national or international calamity or crisis of such magnitude in its effect on any financial market which, in each case, in the  reasonable  judgment  of  CANX,  makes  it  impracticable  or  inadvisable  to purchase the Securities.
 
 
d.
No   Injunction .    No  statute,  rule,  regulation,  executive  order,  decree,  ruling  or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.
 
 
e.
No   Proceedings   or   Litigation .  No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against GrowLife, or any of the officers, directors or affiliates of GrowLife, seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.
 
 
GrowLife-CANX JV Agmnt, Page 22

 
 
 
f.
Secretary’s   Certificate .    GrowLife  shall  have  delivered  to  CANX  a  secretary’s certificate, dated as of the effective date of this Agreement, as to (i) resolutions adopted by the Board of Directors of GrowLife, (ii) the Articles and the Bylaws, each as in effect at the effective date of this Agreement, and (iii) the authority and incumbency of the officers of GrowLife executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith.
 
 
g.
Officer’s   Certificate .  On the effective date of this Agreement, GrowLife shall have delivered to CANX a certificate of an executive officer of GrowLife, dated as of the effective date of this Agreement, confirming the accuracy of GrowLife’s representations, warranties and covenants as of the effective date of this Agreement and confirming the compliance by GrowLife with the conditions precedent set forth in this Agreement as of the effective date of this Agreement.
 
 
h.
Fees   and   Expenses . As of the effective date of this Agreement, all fees and expenses required to  be  paid  by  GrowLife  shall  have  been  or  authorized to  be  paid  by GrowLife as of the effective date of this Agreement.
 
 
i.
Registration   Rights   Agreement .   As of the effective date of this Agreement, the parties shall have entered into the Registration Rights Agreement in the Form of Exhibit C attached hereto.
 
 
j.
Board   Resolutions .  As of the effective date of this Agreement, GrowLife shall have delivered certified resolutions of the GrowLife board of directors approving this Agreement, and all of the transactions contemplated herein, including, without limitation, the OGI Director, the OGI nomination of Successor CEOs, and Minimum Increase of Authorized Shares.
 
 
k. 
Material   Adverse   Effect . No Material Adverse Effect shall have occurred.
 
 
l.
Opinion of   Counsel .  Counsel to GrowLife shall have delivered to CANX an opinion of counsel satisfactory to CANX, acting reasonably, regarding: (A) the validity of the incorporation of GrowLife, (B) the good standing of GrowLife with respect to the filing of annual reports and the validity of the issue and full payment of the Securities, and (C) as to the due authorization, execution and delivery of this Agreement, (D) the capital of GrowLife, (E) non-contravention and no breach of laws or the articles or bylaws of GrowLife, or any contract or agreement to which GrowLife is a party, as a result of the execution, delivery and performance of this Agreement by GrowLife, (F) no “anti-takeover” laws (including, without limitation, Section 203 of the Delaware corporate code) are triggered by the execution and performance of this Agreement, and (G) the enforceability of this Agreement.
 
 
GrowLife-CANX JV Agmnt, Page 23

 
 
13.          Confidentiality .
 
 
a.
Disclosure   of   Terms   of   Agreement   by   OGI   and/or   CANX.   OGI and CANX agree that they will not engage in any discussion or reveal information contained in this Agreement  with  anyone  outside  of  its  privileged  communications  within  OGI, CANX and their current and prospective officers, directors and contracted professionals, and investors, and to such extent only on a need to know basis.
 
 
b.
Disclosure   of   Terms   of   Agreement  by   GrowLife.     The  Parties  understand  that GrowLife is a publicly-traded company subject to various disclosure requirements under Federal and State securities laws. GrowLife agrees that prior to issuing a public a press release that includes information about OGI and/or any of its affiliates; it will submit a copy of such press release to OGI together with a request for OGI approval, which such request shall not be unreasonably withheld.
 
14.         Allocation   of   Net   Profits and   Losses .   Except as otherwise provided in this Agreement, the Net Profits and Net Losses of OGI will be allocated solely as provided in OGI’s operating agreement.
 
15.         Distributions .     OGI shall distribute the Net Cash from Operations as provided in OGI’s operating agreement.
 
16.         Reimbursement   and   Expenses .      GrowLife  shall  not  be  obligated  to  reimburse  any expenses incurred by OGI. OGI shall pay all of its own expenses reasonably incurred in the operation of OGI and OGI New Business, provided however, such expenses and other costs and expenses incurred in the ordinary course of business shall be credited against the Transaction Financing.
 
17.         Books   and   Records .   OGI shall maintain complete and accurate books of account of OGI as provided by applicable law.
 
18.         Insurance .   OGI will be a separate and distinct limited liability company organized under the laws of the State of Nevada.  OGI will purchase appropriate insurance for OGI and it will maintain this insurance for the duration of its existence.
 
19.         Liability   of   Joint   Venturers.     No Party shall be liable, responsible or accountable in damages or otherwise to any other Party for any act or omission performed or omitted to be performed in good faith and pursuant to the authority granted to the Party by this Agreement, unless the act or failure to act is attributable to fraud, gross negligence or willful misconduct on that Party's part.
 
20.         Arbitration .   This Agreement, its Exhibits and the rights of the Parties hereunder shall be governed by and construed in accordance with the laws of the State of Nevada including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws.   Any and all disputes arising under the terms of this Agreement that cannot be resolved by the Parties shall be resolved by binding arbitration under the jurisdiction of JAMS in Clark County, Nevada.
 
 
GrowLife-CANX JV Agmnt, Page 24

 
 
21.         Miscellaneous .
 
 
a.
Notice.   Any notice, request, instruction, or other document required by the terms of this Agreement, or deemed by any of the Parties hereto to be desirable, to be given to any other Party hereto shall be in writing and shall be given by facsimile, personal delivery, overnight delivery electronic mail delivery, or mailed by registered or certified mail, postage prepaid, with return receipt requested, to the following addresses:
 
  If to GrowLife:   GrowLife, Inc.  
    20301 Ventura Boulevard, Suite 126  
    Woodland Hills, CA 91364  
    Attn: Mr. Sterling Scott sscott@growlifeinc.com  
       
       
  If to CANX/OGI: CANX USA LLC  
    410 South Rampart Boulevard, Suite 350  
    Las Vegas, Nevada 89145  
    Attn: Mr. Bryan Williams  
    (702) 360-6000 — Fax: (702) 360-0000
E-Mail:  bwilliams@sklar-law.com
 
                          
 
a.
Attorneys’   Fees.     If  a  dispute  should  arise  between  the  Parties  hereunder,  the prevailing Party shall be reimbursed by the non-prevailing Party for all reasonable attorney's fees and costs (including all arbitration costs) incurred by the prevailing Party in resolving such dispute.
 
 
b.
Applicable   Law.   This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to any principles of conflicts of laws.
 
 
c.
Assignment.   Unless provided for hereunder this Agreement, no Party shall assign or transfer its rights or obligations under this Agreement without the express prior written consent of the other Party.
 
 
d.
Severability.     If  any  provision  of  this  Agreement  is  unenforceable,  invalid,  or violates applicable law, such provision shall be deemed stricken and shall not affect the enforceability of any other provisions of this Agreement.
 
 
e.
Modification.   No change, modification, addition, or amendment to this Agreement shall be valid unless in writing and signed by all Parties hereto.
 
 
f.
Entire   Agreement.   This Agreement and its Exhibits set forth the entire agreement and understanding of the Parties hereto with respect to the transactions contemplated hereby,  and  supersedes  all  prior  agreements,  arrangements,  and  understandings related to the subject matter hereof.   No understanding, promise, inducement, statement of intention, representation, warranty, covenant, or condition, written or oral, express or implied, whether by statute or otherwise, has been made by any Party hereto which is not embodied in this Agreement.
 
 
GrowLife-CANX JV Agmnt, Page 25

 
 
 
g.
Counterparts.    This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  The Parties agree that facsimile signatures of this Agreement shall be deemed a valid and binding execution of this Agreement.
 
 
h.
Authority.    Each of the Parties and signatories to this Agreement has full right, power, legal capacity and authority to enter into and perform the Party’s respective obligations under this Agreement, and no approvals or consents of any other persons are necessary in connection with that authority.
 
 
i.
Captions.    Titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof.
 
 
j. 
Time   of Essence.      Time is of  the essence of  each and every provision of  this Agreement.
 
 
k.
Effective Date.     The  parties  agree  to  submit  this  Agreement  for  approval  and ratification by the respective Directors of each of the Parties not later than November 19, 2013.   The effective date of execution of this Agreement shall be the date on which the respective Directors/Managers of each of Parties shall have approved and ratified this Agreement.
 
IN   WITNESS   WHEREOF,   the  undersigned  has  caused  this  Agreement  to  be  duly executed as of the date set out above.   
 

  GROWLIFE, INC.     CANX  USA, LLC
         
         
By:
/s/ Sterling Scott
 
By:
/s/ Randy Breitman
 
Name: Sterling Scott
Title:    Chief Executive Officer
   
Name: Randy Breitman
Title:    Manager
      CANX USA, LLC
       
       
     
BY:
/s/ Anthony J. Ciabattoni 
        CANX USA II, LLC
Manager, CANX USA, LLC
Name: Anthony J. Ciabattoni
Title: Manager of CANX USA II, LLC
 
 
 
GrowLife-CANX JV Agmnt, Page 26
 


Exhbibit 10.2
 
WARRANT
 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND, ACCORDINGLY,  MAY  NOT  BE  TRANSFERRED  UNLESS  (I)  SUCH  SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144,
 
OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
 
PURSUANT  TO  THE  TERMS  OF  SECTION  1  OF  THIS  WARRANT,  ALL  OR  A PORTION OF THIS WARRANT MAY HAVE BEEN EXERCISED, AND THEREFORE THE ACTUAL NUMBER OF WARRANT SHARES REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE AMOUNT SET FORTH ON THE FACE HEREOF.
 
GROWLIFE, INC.

W ARRANT T O P URCHASE C OMMON S TOCK
 

Warrant No.:                            
 
Number of Shares of Common Stock:                                                         
Date of Issuance: November         , 2013 ( “Issuance   Date” )
 
GrowLife, Inc., a Delaware corporation (the “Company” ), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [INVESTOR NAME], the registered holder hereof or its permitted assigns (the “Holder” ), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant” ), at any time or times on or after the date hereof (the “Exercisability Date” ), but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), [                            (                          )] fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant   Shares” ).  Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section   15 .  Capitalized terms used but not otherwise defined in this Warrant shall have the meanings set forth in the JV Agreement (as defined below). This Warrant is the Warrant to purchase Common Stock (this “Warrant” ) issued pursuant to (i) the Joint Venture  Agreement  (the   “JV     Agreement” ),  dated  as   of   November  19,   2013   (the “Subscription   Date” ), by and among the Company and CANX USA LLC.  This Warrant is one of a series of warrants containing substantially identical terms and conditions issued pursuant to the JV Agreement (collectively, the “ Warrants ”).
 
 
Exhibit A, Page 1

 

 
1.    EXERCISE   OF WARRANT.
 
(a) Mechanics   of   Exercise .  Subject to the terms and conditions hereof, this
 
Warrant may be exercised by the Holder on any day on or after the Exercisability Date, in whole or in part (but not as to fractional shares), by delivery of a written notice, in the form attached hereto as Exhibit   A (the “ Exercise   Notice ”), of the Holder’s election to exercise this Warrant, together with payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “ Aggregate   Exercise   Price ”) either in cash or wire transfer of immediately available funds, or a promissory note executed by Holder (with a maximum term of  five (5) days commencing from the date that GrowLife delivered to Holder GrowLife stock certificates (“Warrant Note”);(a “ Cash   Exercise ”) (the items under (i) and (ii) above, the “ Exercise Delivery   Documents ”).   The Holder shall not be required to surrender this Warrant in order to effect an exercise hereunder; provided, however, that in the event that this Warrant is exercised in full or for the remaining unexercised portion hereof, the Holder shall deliver this Warrant to the Company for cancellation within a reasonable time after such exercise.   On or before the first Trading Day following the date on which the Company has received the Exercise Delivery Documents  (the  date  upon  which  the  Company  has  received  all  of  the  Exercise  Delivery Documents, the “ Exercise Date ”), the Company shall transmit by facsimile or e-mail transmission an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent for the Common Stock (the “ Transfer Agent ”). The Company shall deliver any objection to the Exercise Delivery Documents on or before the second Trading Day  following  the  date  on  which  the  Company  has  received  all  of  the  Exercise  Delivery Documents.  On or before the second Trading Day following the date on which the Company has received all of the Exercise Delivery Documents (the “ Share   Delivery   Date ”), the Company shall, (X) provided that the Transfer Agent is participating in The Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program (the “ FAST   Program ”) and so long as the certificates therefor are not required to bear a legend regarding restriction on transferability, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y), if the Transfer Agent is not participating in the FAST Program or if the certificates are required to bear a legend regarding restriction on transferability, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.  Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be.  If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for  exercise is greater than the number of  Warrant Shares being acquired upon  an exercise, then the Company shall as soon as practicable and in no event later than three Trading Days after any such submission and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant has been and/or is exercised.  The Company shall pay any and all taxes and other expenses of the Company (including overnight delivery charges) that may be payable with respect to the issuance and delivery of Warrant Shares and a replacement Warrant (if necessary) upon  exercise of  this  Warrant; provided , however , that the  Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an affiliate thereof.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
 
 
Exhibit A, Page 2

 

 
(b) Exercise   Price .  For purposes of this Warrant, “Exercise   Price”   means $0.033.
 
(c) Company’s   Failure   to   Timely   Deliver   Securities .  If the Company shall fail for any reason or for no reason to issue to the Holder within three (3) Business Days of the Exercise Date a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant, and if on or after such Trading Day the Holder purchases, or another Person purchasers on the Holder’s behalf or for the Holder’s account (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a “Buy-In” ), then the Company shall, within three (3) Business Days after the Holder’s written request and in the Holder’s discretion, either (i) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (ii) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
 
(d)  Cashless   Exercise INTENTIONALLY   DELETED :
 
(e) Rule   144 .  For purposes of Rule 144(d) promulgated under the Securities Act of 1933, as amended, as in effect on the date hereof, assuming the Holder is not an affiliate of the Company, it is intended that the Warrant Shares issued in a Cash Exercise (as provided in 1.a. above) shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the Issuance Date.
 
(f)   Disputes .  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed.
 
 
Exhibit A, Page 3

 

 
(g) Beneficial   Ownership .    Beneficial  ownership  shall  be  calculated  in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).  For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of (1) the Company’s most recent Form 10-K, Form 10-Q, Current Report on Form
 
8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the
 
Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business
 
Days confirm to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.
 
(h) No   Fractional Shares   or   Scrip .  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
 
2. ADJUSTMENT   OF   EXERCISE   PRICE AND   NUMBER   OF   WARRANT SHARES .  The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
 
(a) Adjustment   upon   Subdivision   or   Combination   of   Common   Stock .  If the Company at any time on or after the Subscription Date combines (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.
 
 
Exhibit A, Page 4

 
 
(b) Other   Events .    If  any  event occurs  of  the  type contemplated by  the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights or phantom stock rights), then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder; provided that no such adjustment pursuant to this Section 2(b) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.
 
(c) Voluntary   Adjustment   By   Company . The Company may, in its sole discretion, at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

(d) Calculations . All calculations under this Section 2 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 2, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
 
3.    RIGHTS   UPON DISTRIBUTION   OF ASSETS .
 
(a) If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Weighted Average Price determined as of the record date mentioned above, and of which the numerator shall be such Weighted Average Price on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.   Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

4.    PURCHASE   RIGHTS;   FUNDAMENTAL   TRANSACTIONS .
 
(a) Purchase   Rights .   In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to all of the record holders of any class of Common Stock (the “ Purchase   Rights ”), then the Holder will be entitled to acquire, upon  the  exercise of  this  Warrant and  on  the  terms  applicable to  such  Purchase Rights,  the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
 
 
Exhibit A, Page 5

 
 
(b) Fundamental   Transactions .  The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing (unless the Company is the Successor Entity) all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section (4)(b) pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of the Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without  limitation, an  adjusted  exercise price  equal  to  the  value  for  the  shares  of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number  of  shares  of  capital  stock  equivalent to  the  shares  of  Common  Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and reasonably satisfactory to the Required Holders. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of the publicly traded common stock or common shares (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate   Event ”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Corporate Event but prior to the Expiration Date, in lieu of shares of Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior to such Corporate Event, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Corporate Event had this Warrant been exercised immediately prior to such Corporate Event. Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders. The provisions of this Section  (b)  shall  apply  similarly  and  equally  to  successive  Fundamental  Transactions  and Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.
 
 
Exhibit A, Page 6

 

 
(c) Applicability to   Successive   Transactions .   The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.
 
5.    NONCIRCUMVENTION .  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith comply with all the provisions of this Warrant and take all actions consistent with effectuating the purposes of this Warrant.  Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as this Warrant is outstanding, take all action necessary to reserve and keep available out of  its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of this Warrant, 100% of the number of shares of Common Stock issuable upon exercise of this Warrant then outstanding (without regard to any limitations on exercise).
 
6.    WARRANT   HOLDER   NOT   DEEMED   A   STOCKHOLDER .     Except  as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
 
7.    REISSUANCE   OF WARRANTS .
 
(a) Transfer   of   Warrant .  If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company and deliver the completed and executed Assignment Form, in the form attached hereto as Exhibit B , whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
 
 
Exhibit A, Page 7

 
 
(b) Lost,   Stolen   or   Mutilated   Warrant .   Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
 
(c) Exchangeable   for   Multiple   Warrants .    This  Warrant is  exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be given.
 
(d) Issuance   of   New   Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
 
8.    NOTICES .  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 7.5 of the Purchase Agreement.
 
9. AMENDMENT   AND   WAIVER .  Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Required Holders. Any such amendment shall apply to all Warrants and be binding upon all registered holders of such Warrants.

10. GOVERNING   LAW;   CONSENT   TO   JURISDICTION;   WAIVER   OF   JURY TRIAL .  This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in the City of New York, for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  The Company and, by accepting this Warrant, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.   EACH   OF   THE   COMPANY   AND,   BY ITS   ACCEPTANCE   HEREOF, THE   HOLDER   HEREBY   WAIVES   ANY   RIGHT   TO REQUEST A   TRIAL   BY   JURY   IN   ANY   LITIGATION   WITH   RESPECT   TO   THIS WARRANT   AND   REPRESENTS   THAT COUNSEL HAS   BEEN   CONSULTED SPECIFICALLY   AS TO   THIS   WAIVER.
 
 
Exhibit A, Page 8

 
 
11. CONSTRUCTION;   HEADINGS .   This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.
 
12. DISPUTE RESOLUTION . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price  or  the  Warrant  Shares  within  three  Business  Days  of  such  disputed  determination  or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder, which approval shall not be unreasonably withheld, or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations.  The prevailing party in any dispute resolved pursuant to this Section 12 shall be entitled to the full amount of all reasonable expenses, including all costs and fees paid or incurred in good faith, in relation to the resolution of such dispute.  Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
 
13. REMEDIES,     OTHER     OBLIGATIONS,     BREACHES     AND     INJUNCTIVE RELIEF .  The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.
 
14. TRANSFER .  Subject to applicable laws, this Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company
 
15. CERTAIN   DEFINITIONS .  For purposes of this Warrant, the following terms shall have the following meanings:
 
(a) “Bloomberg”   means Bloomberg, L.P.
 
(b) “Business   Day”   means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.
 
(c) “Closing   Bid   Price”   and “Closing   Sale   Price”   means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the 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 the last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security 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 such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).   If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
 
 
Exhibit A, Page 9

 

 
(d) “Common   Stock”   means (i) the Company’s shares of Common Stock, par value $0.0001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.
 
(e) “Eligible   Market”   means the Principal Market, The New York Stock Exchange, Inc., The NYSE MKT, The NASDAQ Global Market, The NASDAQ Global Select Market, or The NASDAQ Capital Market.
 
(f)   “Expiration   Date”   means the fifth anniversary of the Exercisability Date or, if such date falls on a day other than a Trading Day or on which trading does not take place on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded (a “ Holiday ”), the next date that is not a Holiday.
 
(g) “Fundamental Transaction”   means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person (but excluding a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company), or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.
 
(h) “Options”   means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Common Stock Equivalents.
 
(i)   “Parent   Entity”   of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
 
(j)   “Person”   means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
 
 
Exhibit A, Page 10

 
 
(k) “Principal   Market”   means The OTC Market.

(l) “Required   Holders” means, as of any date, the holders of at least a majority of the Warrants outstanding as of such date.

(m) “Successor   Entity”   means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
 
(n) “Trading   Day”   means any day on which shares of Common Stock are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock,  then  on  the  principal securities exchange or  securities market on  which  the Common Stock are then traded; provided   that “Trading Day” shall not include any day on which the Common Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).
 
(o) “Weighted   Average Price”   means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume- weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets LLC. If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 12 with the term “Weighted Average Price” being substituted for the term “Exercise Price.” All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period..
 

[Signature Page Follows]

 
 
Exhibit A, Page 11

 
 
 
IN   WITNESS   WHEREOF,   the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.
 


 
  GROWLIFE, INC.  
       
       
  By: /s/ Sterling Scott  
  Name: Sterling Scott  
  Title:   Chief Executive Officer  
       
 
 
 
 
 
Exhibit A, Page 12

 

 
EXHIBIT A
 

 
EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT TO PURCHASE COMMON STOCK

GROWLIFE, INC.

 
The undersigned holder hereby exercises the right to purchase                          of the shares of Common Stock ( “Warrant   Shares” ) of GrowLife, Inc., a Delaware corporation (the “Company” ), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant” ). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
 

     1.   Form   of   Exercise   Price .  The Holder intends that payment of the Exercise Price shall be made as:
 
      a   Cash   Exercise   with  respect  to        
       Warrant Shares; and/or      
 
     2.   Payment of   Exercise Price .  In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $                                   with the terms of the Warrant. to the Company in accordance

     3.       Delivery   of   Warrant   Shares .   The Company shall deliver to the holder                      Warrant Shares in accordance with the terms of the Warrant and, after delivery of such Warrant Shares,                                     Warrant Shares remain subject to the Warrant.

 
 Date:         
         Name of Registered Holder
         
      By:   
         
      Name:  
         
      Title:  
         
      Address:  
         
      Tax I.D.#    
         
         
         
 
A-1
 
 
 

 
                                                             
 
EXHIBIT B
 

 
ASSIGNMENT FORM
 
GROWLIFE, INC.
 
     (To assign the foregoing Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)
 

     FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
 
 
           
Name:      
(Please Print)
           
           
Address:       (Please Print)
           
Dated:          
           
Holder’s Signature:           
           
Holder’s Address:          
       
 
 
NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever.   Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
 
 
 
 
 
B-1



 

Exhibit 10.3
 
 

 
Convertible Note
 

THIS 7% CONVERTIBLE NOTE (THIS “ NOTE ”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES   ACT ”), OR THE SECURITIES LAWS OF ANY STATE, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
 
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.

GROWLIFE, INC.
 

7% CONVERTIBLE NOTE

Issuance Date:                                                                          , 2013

Original Principal Amount: $                                         
 
 
FOR  VALUE  RECEIVED,   GROWLIFE ,   INC. ,  a  Delaware  corporation  (the Company ”),  hereby  promises  to  pay  to  the  order  of ,  or  registered assigns (the “ Holder ”), the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “ Principal ”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“ Interest ”) on any outstanding Principal at the applicable Interest Rate (as defined below) from the date set forth above as the Issuance Date (the “ Issuanc e   Date ”) until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).

1.   General  Terms.

(a)           Payment of Principal. The “ Maturity   Date ” shall be September 30, 2015.

(b)       Interest. Interest on the unpaid Principal shall accrue daily at the rate of seven percent (7%) (the “ Interest   Rate ”) per annum commencing on the Issuance Date and compounding on the Maturity Date; provided that from and after the occurrence and during the continuance of an Event of Default (as defined below) interest shall accrue all of the unpaid Principal hereunder at the lesser of the default rate of twenty-four percent (24%) per annum or the maximum rate permitted under any applicable law (the “ Default   Rate ”).
 
 
Exhibit B, Page 1

 
 
(c)       Security.  All obligations hereunder are secured by a security interest in all assets of the Company and its Subsidiaries.

2.   Events of Def ault.

(a)       Event of Default.  An “ Even t   o f   Default ”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
 
(i)        The Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder);
 
(ii)           A Conversion Failure as defined in Section 3(b)(ii) hereof;
 
(iii)    The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of sixty-one (61) days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty-one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;
 
(iv)      The Company or any subsidiary of the Company shall default in any of its obligations under any other note or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created;
 
(v)       The common stock of the Company (“ Common   Stock ”) is suspended or delisted for trading on the Over the Counter Bulletin Board market (the “ Primary Market ”) and the OTCQB;
 
 
 
Exhibit B, Page 2

 
 
(vi)           The Company loses its status as “DTC Eligible”; or

(vii)           The Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities & Exchange Commission.
 
(b)       Cure Period.   Upon receiving a written notice of the occurrence of an Event of Default, the Company shall have a grace period of five (5) Business Days to cure such Event of Default.
 
(c)       Remedies Upon Event of Default.  In addition to any other remedies provided for herein, while an Event of Default occurs and is continuing, the outstanding Principal, plus accrued but unpaid Interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount.  The “ Mandator y   Defaul t   Amount ” is equal to the greater of (i) one hundred twenty percent (120%) of the outstanding Principal (plus all accrued and unpaid Interest, if any) and (ii) the product of (A) the highest closing price for the five (5) days on which the principal Primary Market is open for business (a “ Tradin g   Day ”) immediately preceding the Holder’s acceleration and (B) a fraction, of which the numerator is the entire outstanding Principal, and of which the denominator is the Conversion Price as of the date such ratio is being determined. After the occurrence and during the continuance of any Event of Default, the interest rate on this Note shall accrue at the applicable Default Rate.   Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder 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 the Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of this Note until such time, if any, as the Holder receives full payment pursuant to this Section 2(c).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
 
3.   Conversion of Note.  This Note shall be convertible into shares of Common Stock, on the terms and conditions set forth in this Section 3.

(a)       Conversion Right.  Subject to the provisions of Section 3(c), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b), at the Conversion Price (as defined below) subject to the Conversion Minimum (as defined below).  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price (“ Conversion   Shares ”).  The Company shall not issue any fraction of a share of Common Stock upon any conversion.   If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.  The Company shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection with the issuance of shares of Common Stock to the Holder arising out of or relating to the conversion of this Note.

 
 
Exhibit B, Page 3

 
 
(i)        “ Conversion   Amount ” means the portion of the Principal and Interest to be converted, plus any penalties, redeemed or otherwise with respect to which this determination is being made.
 
(ii)      For the period of time from the date of this note through and including September 30, 2014, “ Conversion   Price ” shall equal the lesser of (A) $0.025 or (B) seventy percent (70%) of the average of the three (3) lowest daily VWAPs occurring during the twenty (20) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note, and for the period of time thereafter “ Conversion   Price ” shall equal $0.025.
 
(iii)     “ Conversion   Minimum ” shall, unless otherwise approved in writing by the Company, constitute any individual conversion of at least an amount equal to $25,000 of the Principal.
 
(iv)      “ VWAP ” means,  for  any  date,  the  price  determined  by  the  first  of  the following clauses that applies: (a) the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Primary Market; (b) if the Common Stock is not then quoted for trading on the Primary Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.
 
(b)           Mechanics of Conversion.
 
(i)      Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “ Conversio n   Date ”), the Holder shall transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “ Conversion Notice ”) to the Company. On or before the third (3 rd ) Business Day following the date of receipt of a Conversion Notice, the Company shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“ Rul e   144 ”) and provided that the Company’s transfer agent is participating in the Depository Trust Company's (“ DTC ”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC, or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144.   If this Note is physically surrendered for conversion and the outstanding Principal is greater than the Principal portion of the Conversion Amount being converted, then the Company shall, upon request of the Holder, as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted.  The individual, corporation, partnership, limited liability company, limited liability partnership, trust, association, organization or other entity (each a “ Person ”) entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.  For the purposes hereof, the term “ Business   Day ” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of California are authorized or required by law or other governmental action to close.
 
 
Exhibit B, Page 4

 

 
(ii)       Company’s Failure to Timely Convert. If within three (3) Business Days after the Company’s receipt of the facsimile or email copy of a Conversion Notice, the Company shall fail to issue and deliver to Holder the number of shares of Common Stock to which the Holder is entitled upon such Holder's conversion of any Conversion Amount (a “ Conversion Failure ”), the Principal shall increase by $3,000 per day until the Company issues and delivers a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s conversion of any Conversion Amount.  If the Company fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded Conversion Amount returned to the Principal with the rescinded Conversion Shares returned to the Company.
 
(iii)     DTC Eligibility.  If the Company loses its status as “DTC Eligible” for any reason, the Conversion Price shall thereafter be redefined to mean the lesser of (A) $0.02 and (B) fifty percent (50%) of the lowest trade occurring during the twenty (20) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.
 
(iv)      Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note.  The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.
 
(c)           Other Provisions.
 
(i)        Share Reservation.     The  Company  shall  at  all  times  reserve  and  keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note; and within five (5) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of underlying shares of Common Stock is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. The Company will at all times reserve at least the minimum number of shares of Common Stock which are, at any given time, necessary for conversion.
 
 
Exhibit B, Page 5

 
 
 
(ii)       Prepayment.  At any time after the twelve (12)-month period immediately following the Issuance Date, the Company shall have the option, upon ten (10) Business Days’ notice to Holder, to pre-pay the entire remaining outstanding principal amount of this Note in cash, provided that (A) the Company shall pay the Holder one hundred fifty percent (150%) of the Principal plus Interest outstanding in repayment hereof, (B) such amount must be paid in cash on the next Business Day following such ten (10) Business Day notice period, and (C) the Holder may still convert this Note pursuant to the terms hereof at all times until such prepayment amount has been received in full.  Except as set forth in this Section the Company may not prepay this Note in whole or in part.
 
(iii)           All calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.

(iv)      Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
 
4.   Adjustments to Conversion Price; Fundamental Transactions.  The Conversion Price and the number and kind of securities issuable upon conversion of this Note shall be subject to adjustment from time to time as set forth in this Section 4.
 
(a)    Stock Dividends and Splits .     If at any time while this Note is outstanding the Company (i) declares or pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock (or securities convertible into or exercisable or exchangeable for capital stock) that is payable in shares of Common Stock, (ii) combines (including, without limitation, by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iii) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company (including, without limitation, in connection with any merger or consolidation), then in each such case the Conversion Price then in effect shall be adjusted by multiplying such Conversion Price by a fraction of which (A) the numerator shall be the number of shares of Common Stock outstanding immediately before such event, and (B) the denominator shall be the number of shares of Common Stock outstanding immediately after such event.   Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for such dividend or distribution, and any adjustment made pursuant to clauses (ii), or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision, combination or reclassification.
 
 
Exhibit B, Page 6

 
 
(b)     Pro Rata Distributions .   Subject to Section 4(c) below, if at any time while this Note is outstanding the Company declares or pays any dividend or otherwise distributes any of its assets (including, without limitation, cash, properties, evidences of indebtedness, securities (including any options or other convertible securities but excluding a distribution of Common Stock covered by Section 4(a) above or Purchase Rights covered by Section 4(c) below) or options or rights to acquire any such assets) (in each case, Distributed Property ”) to all holders of Common Stock pro rata   (and not to all Holders in their capacity as holders of Notes), whether by way of dividend, return of capital, spin-off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, then in each such case the Conversion Price in effect immediately prior to the close of business on the record date for such dividend or distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Conversion Price by a fraction of which (i) the denominator shall be the closing price of Common Stock on the Primary Market on such record date (the “ Market   Price ”), and (ii) the numerator shall be such Market Price minus the value of the Distributed Property on such date applicable to one outstanding share of Common Stock, as determined by the Company’s independent certified public accounting firm that regularly examines the financial statements of the Company.
 
(c)      Rights Offerings Below Market .   Notwithstanding Section 4(b) above, if at any time while this Note is outstanding the Company grants, issues or sells pro   rata   to all holders of its outstanding shares of Common Stock, any options, convertible securities or other rights (the “ Purchase   Rights ”) entitling them to directly or indirectly subscribe for or purchase shares of Common Stock at an effective price per share less than the Market Price on the record date of such grant, issuance or sale, then in each such case the Conversion Price in effect immediately prior to the close of business on such record date shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Conversion Price by a fraction of which (i) the numerator shall be the number of shares of Common Stock outstanding as of the close of business on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares so offered for subscription or purchase (including and assuming receipt by the Company in full of all consideration payable upon both issuance and exercise of such Purchase Rights) would purchase at such Market Price, and (ii) the denominator shall be the number of shares of Common Stock outstanding as of the close of business on such record date plus the total number of additional shares of Common Stock so offered for subscription or purchase; provided,   that in lieu of receiving such adjustment to the Conversion Price, the Holder shall have the option, upon written notice to the Company within thirty (30) days following its receipt of the notice of such adjustment, to elect to acquire, upon any conversion of this Note and in accordance with  the  terms applicable to  the  issuance of  such  Purchase Rights, the  aggregate Purchase Rights which the Holder would have acquired if the Holder had converted such portion of this Note being converted (without regard to any limitations on ownership or conversion and regardless of whether this Note was then convertible) immediately prior to such record date.  To the extent that shares of Common Stock have not been delivered pursuant to such Purchase Rights specified in this Section upon the expiration or termination of such Purchase Rights, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustment made upon the issuance of such Purchase Rights been made on the basis of delivery of only the number of shares of Common Stock actually delivered. In determining whether any Purchase Rights entitle the holder thereof to subscribe for or purchase shares of Common Stock at less than such Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such Purchase Rights, the value of such consideration (if other than cash) to be determined in good faith by the Company’s Board of Directors.
 
Exhibit B, Page 7

 
 
 
(d)    Fundamental Transactions .   If at any time while this Note is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each, a “ Fundamental Transaction ”), then the Holder shall have the right thereafter to receive, upon any conversion of this Note, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same amount and kind of securities, cash and property as the Holder would have been entitled to receive upon the occurrence of such Fundamental Transaction if the Holder had been the record holder of one Conversion Share immediately prior to such Fundamental Transaction (without regard to any limitations or restrictions on conversion or acquisition of Conversion Shares and whether or not this Note was then convertible) (the “ Alternat e Consideration ”) , and the Conversion Price shall be appropriately and equitably adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction relative to the then Conversion Price. The Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. In case of any such Fundamental Transaction, any successor to the Company, acquirer or surviving entity (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant, obligation, liability and condition under this Note to be performed and observed by the Company, subject to such modifications as may be reasonably deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of the number and kind of Conversion Shares for which this Note is convertible which shall be as nearly equivalent as practicable to the adjustments provided for in this Section. Such assumption shall be pursuant to a written agreement in form and substance reasonably satisfactory to the Holder. At the Holder’s request, any successor to the Company, acquirer or surviving entity in such Fundamental Transaction shall issue to the Holder a new Note from such entity substantially similar in form and substance to this Note and consistent with the foregoing provisions, which new Note shall be reasonably satisfactory to the Holder and include, without limitation, (A) the outstanding Principal and Interest owed to the Holder under this Note, (B) an interest rate equal to the Interest Rate, (C) similar ranking to this Note, and (D) the Holder’s right to convert the new Note into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor, acquirer or surviving entity to comply with the provisions of this Section and ensuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary contained herein, if a Fundamental Transaction (X) is an all cash transaction, (Y) constitutes or results in a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act (going private transaction), or (Z) otherwise results in the successor, surviving or acquiring entity not being traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, then upon the written request of the Holder, delivered before the sixtieth (60th) day after such Fundamental Transaction, the Company (or any such successor, acquirer or surviving entity) shall redeem this Note from the Holder for a redemption price, payable in cash within five (5) Business Days after such request (or, if later, on the effective date of such Fundamental Transaction), equal to the value of this Note as determined using the Black-Scholes Option Pricing Model via Bloomberg.  The provisions of this Section shall similarly apply to successive Fundamental Transactions and shall be applied without regard to any limitations of this Note.
 
 
Exhibit B, Page 8

 
 
5.           Reissuance of this Note.
 
(a)       Assignability.  The Company may not assign this Note. This Note will be binding upon the Company and its successors and will inure to the benefit of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without the Company’s approval.
 
(b)       Lost,  Stolen  or  Mutilated  Note.  Upon  receipt  by  the  Company  of  evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.

6.   Notices.  Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally; (b) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); (c) upon receipt, when sent by email; or (d) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be those set forth in the communications and documents that each party has provided the other immediately preceding the issuance of this Note or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (x) given by the recipient of such notice, consent, waiver or other communication, (y) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (z) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (x), (y) or (z) above, respectively.
 
The addresses for such communications shall be:
 
If to the Company, to:

GROWLIFE, INC.
20301 Ventura Blvd., Suite 126
Woodland Hills, CA 91364
Attn:           Sterling C. Scott, CEO Facsimile: 800-770-9788
Email: sscott@growlifeinc.com

 
Exhibit B, Page 9

 
 
If to the Holder:
 
                                                               
                                                               

                                                               
 
 
Attn:                                                               
Facsimile:                                                                
Email:                                                               
 
7.   Governing Law and Venue. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, employees or agents) shall be commenced in the state and federal courts sitting in the County of Clark (the “ Clark   County   Courts ”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Clark County Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Clark County Courts, or Clark County Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses reasonably incurred in the investigation, preparation and prosecution of such action or proceeding.

8.   Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver by the Company or the Holder must be in writing.
 
9.   Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any Interest or other amount deemed Interest due hereunder violates the applicable law governing usury, the applicable rate of Interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.
 
 
 
Exhibit B, Page 10

 
 
 
10. Next   Business   Day .  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

11. Counterparts .  This Note may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” or other document image format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” or other document image format data file signature page were an original thereof.
 
 
 

 
[Signature Page Follows]
 
 
 
 
 
Exhibit B, Page 11

 

 
IN WITNESS WHEREOF, the parties hereto have executed this Note, effective as of the Issuance Date.
 
 

 
 
COMPANY: GROWLIFE, INC.
 
       
       
  By: /s/ Sterling Scott  
  Name: Sterling Scott  
  Its:       Chief Executive Officer  
       
       
       
  HOLDER:  
       
  By:     
  Name:    
  Its:      
       
       
       
 


 
 
Exhibit B, Page 12

 
 
  EXHIBIT   A

 
NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 7% Convertible Note (the “ Note ”) due September 30, 2015 of GrowLife, Inc., a Delaware corporation (the “ Company ”), into shares of common stock (“ Common Stock ”) of the Company according to the conditions hereof, as of the date written below.

By the delivery of this Notice of Conversion, the undersigned represents and warrants to the Company that (check one):
 
                                 its ownership of the Common Stock does not exceed the amounts specified under Section 3(c) of the Note, as determined in accordance with Section 13(d) of the Exchange Act.
 
                                  immediately prior to giving effect to this Notice of Conversion, it owns more than 4.99% of the outstanding shares of Common Stock, as determined in accordance with Section 3(c) of the Note.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock pursuant to any prospectus.
 
 
 Conversion calculations:    Date to Effect Conversion:      
       
  Principal to be Converted:     
       
  Interest Accrued on Account    
  of Conversion at Issue:        
       
  Number of shares  of  Common  Stock  to be issued  (not  less  than  $25,000 of the Principal and any accrued but unpaid interest thereon):  
       
       
       
  Signature:     
       
  Name:     
       
  Address for Delivery of Common Stock Certificates  
       
       
       
       
       
 
 
 
 
Exhibit B, Page 13

 
Exhibit 10.4
 
 
REGISTRATION   RIGHTS   A G R EEM EN T
 

 
This Registration Rights Agreement (the “Agreement”) is made and entered into as of this 19th day of November 2013 by and among GrowLife, Inc., a Delaware corporation (the “Company”), and the CANX USA LLC, a Nevada limited liability company, its successors, designees and assigns (“CANX”).  Capitalized terms used herein have the respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein.
 
The parties hereby agree as follows:

1.            Certain   Definitions .
 
As used in this Agreement, the following terms shall have the following meanings:
 
Commission ” means the U.S. Securities and Exchange Commission.
 
Common   Stock ” means the Company’s common stock, par value $0.0001 per share,
 
Prospectus ”  means  (i)  the  prospectus  included  in  any  Registration  Statement,  as amended or  supplemented by  any prospectus supplement, with respect to  the terms of  the offering of any portion of the Registrable Securities covered by such Registration Statement and by   all   other  amendments  and   supplements  to   the   prospectus,  including  post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in Rule 405 under the 1933 Act.
 
Holder ” means CANX and any Affiliate or transferee of CANX who is a subsequent holder of any Registrable Securities.

Register ,” “ registered ” and “ registration ” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document.
 
Registrable Securities ” means the Warrants and the Warrant Shares and any other securities issued or issuable with respect to or in exchange for Registrable Securities, whether by merger, charter amendment or otherwise, provided, that the Holder has completed and delivered to the Company a Selling Stockholder Questionnaire; provided, further, that, a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale without restriction by the Holders pursuant to Rule 144.
 
Registration   Statement ” means any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post- effective amendments, all exhibits and all material incorporated by reference in such Registration
Statement.
 
 
Exhibit C, Page 1

 
 
Required   Holders ” means the Holders holding a majority of the Registrable Securities.
 
Selling   Stockholder   Questionnaire ” means  a  questionnaire in  the  form  attached  as Exhibit   B hereto, or such other form of questionnaire as may reasonably be adopted by the Company from time to time.
 
1933   Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
1934   Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
 
Warrants ” means the warrants to  purchase shares of  Common Stock issued to  the
Holders pursuant to the JV Agreement.
 
Warrant   Shares ” means the shares of Common Stock issuable upon the exercise of the Warrants.
 
2.            Registration .
 
(a)            Registration   Statements .
 
(i)         Initial   Registration   Statement . At any time after the issuance of the Warrants pursuant to the JV Agreement, CANX shall have the right to demand that the Company prepare and file (the date of such demand, the “ Filing   Deadline ”), and the Company agrees that promptly upon such demand, it shall prepare and file with the Commission a Registration Statement on Form S-1 (or, if Form S-1 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of the Registrable Securities), covering the resale of the Registrable Securities.  The out of pocket costs for the filing of the initial registration statement shall be borne by OGI, unless otherwise agreed.   Subject to any Commission comments, such Registration Statement shall include the plan of distribution attached hereto as Exhibit   A ; provided, however, that no Holder shall be named as an “underwriter” in the Registration Statement without the Holder’s prior written consent.  Such Registration Statement also  shall  cover  pursuant  to  Rule  416  such  indeterminate number  of  additional  shares  of Common Stock due to an increase in the number of Warrant Shares resulting from changes in the Conversion Price pursuant to the terms of the Exercise Price pursuant to the terms of the Warrants, as applicable (the “Additional Shares”).  Such Registration Statement shall not include any shares of Common Stock or other securities for the account of any other holder without the prior written consent of the Required Holders. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Holders and their counsel prior to its filing or other submission.  

 
Exhibit C, Page 2

 
 
(ii)        S-3   Qualification .  Promptly following the date (the “Qualification Date”) upon which the Company becomes eligible to use a registration statement on Form S-3 to register the Registrable Securities for resale, but in no event more than thirty (30) days after the Qualification Date (the “Qualification Deadline”), the Company shall file a registration statement on Form S-3 covering the Registrable Securities or Additional Shares, as applicable (or a post- effective amendment on Form S-3 to the registration statement on Form S-1) (a “Shelf Registration Statement”) and shall use its best efforts to cause such Shelf Registration Statement to be declared effective as promptly as practicable thereafter.  If a Shelf Registration Statement covering the Registrable Securities is not filed with the Commission on or prior to the Qualification Deadline, the Company will make pro rata payments to each Holder, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the value of the Securities to be registered based on a price equal to the last closing bid price and last closing trade price of the Company’s Common Stock on the date of the Registration Demand attributable to those Registrable Securities that remain unsold at that time for each 30-day period or pro rata for any portion thereof following the date by which such Shelf Registration Statement should have been filed for which no such Shelf Registration Statement is filed with respect to the Registrable Securities or Additional Shares, as applicable.  Such payments shall constitute the Holders’ exclusive monetary remedy for such events, but shall not affect the right of the Holders to seek injunctive relief.  Such payments shall be made to each Holder in cash no later than three (3) Business Days after the end of each 30-day period.
 
(b)        Expenses .  Intentionally deleted.
 
(c)        Effectiveness .
 
(i)       The Company shall use its best efforts to have the Registration Statement declared effective as soon as practicable.  The Company shall notify the Holders by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Holders with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.
 
(ii)    S-3 Qualification.  Promptly following the date (the “Qualification Date”) upon which the Company becomes eligible to use a registration statement on Form S-3 to register the Registrable Securities for resale, but in no event more than thirty (30) days after the Qualification Date (the “Qualification Deadline”), the Company shall file a registration statement on Form S-3 covering the Registrable Securities or Additional Shares, as applicable (or a post- effective amendment on Form S-3 to the registration statement on Form S-1) (a “Shelf Registration Statement”) and shall use its best efforts to cause such Shelf Registration Statement to be declared effective as promptly as practicable thereafter. If a Shelf Registration Statement covering the Registrable Securities is not filed with the Commission on or prior to the Qualification Deadline, the Company will make pro rata payments to each Holder, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the value of the Securities to be registered based on a price equal to the last closing bid price and last closing trade price of the Company’s Common Stock on the date of the Registration Demand attributable to those Registrable Securities that remain unsold at that time for each 30-day period or pro rata for any portion thereof following the date by which such Shelf Registration Statement should have been filed for which no such Shelf Registration Statement is filed with respect to the Registrable Securities or Additional Shares, as applicable. Such payments shall constitute the Holders’ exclusive monetary remedy for such events, but shall not affect the right of the Holders to seek injunctive relief. Such payments shall be made to each Holder in cash no later than three (3) Business Days after the end of each 30-day period.
 
 
 
Exhibit C, Page 3

 

 
(d)     Rule   415;   Cutback   If at any time the Commission takes the position that the offering of some or all of the Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any Holder to be named as an “underwriter”, the Company shall use its best efforts to persuade the Commission that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the Holders is an “underwriter,” including by using its best efforts to file amendments to the Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission. The Holders shall have the right to participate or have their counsel participate in any meetings or discussions with the Commission regarding the Commission’s position and to comment or have their counsel comment on any written submission made to the Commission with respect thereto. No such written submission shall be made to the Commission to which the Holders’ counsel reasonably objects. In the event that, despite the Company’s best efforts and compliance with the terms of this Section 2(d), the Commission refuses to alter its position, the Company shall first reduce or eliminate any securities to be included by any Person other than a Holder and, if any subsequent reduction is necessary, (i) remove from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the Commission may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “Commission Restrictions”); provided, however, that the Company shall not agree to name any Holder as an “underwriter” in such Registration Statement without the prior written consent of such Holder. Any cut-back imposed on the Holders pursuant to this Section 2(d) shall be allocated among the Holders on a pro rata basis and shall be applied first to any Warrant Shares, unless the Commission Restrictions otherwise require or provide or the Holders otherwise agree. No liquidated damages shall accrue as to any Cut Back Shares until such date as the Company is able to effect the registration of such Cut Back Shares in accordance with any Commission Restrictions (such date, the “Restriction Termination Date” of such Cut Back Shares). From and after the Restriction Termination Date applicable to any Cut Back Shares, all of the provisions of this Section 2 (including the liquidated damages provisions) shall again be applicable to such Cut Back Shares; provided, however, that (i) the Filing Deadline and the Qualification Deadline for the Registration Statement including such Cut Back Shares shall be ten (10) Business Days after such Restriction Termination Date, and (ii) the date by which the Company is required to obtain effectiveness with respect to such Cut Back Shares under Section 2(c) shall be the 90 th   day immediately after the Restriction Termination Date.
 
(e)            Right   to   Piggyback   Registration .
 
(i)       If at any time following the date of this Agreement that any Registrable Securities remain outstanding (A) there is not one or more effective Registration Statements covering all of the Registrable Securities and (B) the Company proposes for any reason to register any shares of Common Stock under the 1933 Act (other than pursuant to a registration statement on Form S-4 or Form S-8 (or a similar or successor form)) with respect to an offering of Common Stock by the Company for its own account or for the account of any of its stockholders, it shall at each such time promptly give written notice to the holders of the Registrable Securities of its intention to do so (but in no event less than thirty (30) days before the anticipated filing date) and, to the extent permitted under the provisions of Rule 415 under the 1933 Act, include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within fifteen (15) days after receipt of the Company’s notice (a “Piggyback Registration”). Such notice shall offer the holders of the Registrable Securities the opportunity to register such number of shares of Registrable Securities as each such holder may request and shall indicate the intended method of distribution of such Registrable Securities.
 
 
Exhibit C, Page 4

 
 
(ii)       Notwithstanding the foregoing, (A) if such registration involves an underwritten public offering, the Holders must sell their Registrable Securities to, if applicable, the underwriter(s) at the same price and subject to the same underwriting discounts and commissions that apply to the other securities sold in such offering (it being acknowledged that the Company shall be responsible for other expenses as set forth in Section 2(b)) and subject to the Holders entering into customary underwriting documentation for selling stockholders in an underwritten public offering, and (B) if, at any time after giving written notice of its intention to register any Registrable Securities pursuant to Section 2(e)(i) and prior to the effective date of the  registration  statement  filed  in  connection  with  such  registration,  the  Company  shall determine for any reason not to cause such registration statement to become effective under the 1933 Act, the Company shall deliver written notice to the Holders and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration; provided, however, that nothing contained in this Section 2(e)(ii) shall limit the Company’s liabilities and/or obligations under this Agreement, including, without limitation, the obligation to pay liquidated damages under this Section 2.

3.          Company   Obligations .    The  Company  will  use  its  best  efforts  to  effect  the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

(a)       use  its  best  efforts  to  cause  such  Registration  Statement  to  become effective and to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold without restriction pursuant to Rule 144 (the “Effectiveness Period”) and advise the Holders in writing when the Effectiveness Period has expired;

(b)       prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;

(c)       provide copies to and permit counsel designated by the Holders to review each Registration Statement and all amendments and supplements thereto no fewer than seven (7) days prior to their filing with the Commission and not file any document to which such counsel reasonably objects;
 
 
Exhibit C, Page 5

 

 
(d)       furnish to the Holders and their legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the Commission, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may  be)  one  (1)  copy  of  any  Registration  Statement  and  any  amendment  thereto,  each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the Commission or the staff of the Commission, and each item of correspondence from the Commission or the staff of the Commission, in each case  relating to  such  Registration Statement (other than  any  portion of  any  thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder that are covered by the related Registration Statement;
 
(e)       use its best efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

(f)        prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the Holders and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Holders and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement ;   provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;

(g)       use  its  best  efforts  to  cause  all  Registrable  Securities  covered  by  a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;
 
 
Exhibit C, Page 6

 

 
(h)      immediately notify the Holders, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the Commission and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

(i)       otherwise use its best efforts to comply with all applicable rules and regulations of the Commission under the 1933 Act and the 1934 Act, including, without limitation, Rule 172 under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the 1933 Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities  hereunder;  and  make  available  to  its  security  holders,  as  soon  as  reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this subsection 3(i), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter); and

(j)        With a view to making available to the Holders the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the Commission that may at any time permit the Holders to sell shares of Common Stock to the public without registration, the Company covenants and agrees to:   (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as  all  of  the  Registrable Securities may  be  sold  without restriction by  the  holders thereof pursuant to Rule 144 or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the Commission in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Holder upon request, as long as such Holder owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Holder of any rule or regulation of the Commission that permits the selling of any such Registrable Securities without registration.
 
 
Exhibit C, Page 7

 

 
4.          Due   Diligence   Review;   Information .  The Company shall make available, during normal business hours, for inspection and review by the Holders, advisors to and representatives of the Holders (who may or may not be affiliated with the Holders and who are reasonably acceptable to the Company), all financial and other records, all Commission Filings (as defined in the Purchase Agreement) and other filings with the Commission, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company’s officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Holders or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Holders and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement.

The Company shall not disclose material nonpublic information to the Holders, or to advisors to or representatives of the Holders, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Holders, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Holder wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.

5.            Obligations   of the   Holders .
 
(a)           Each  Holder  agrees  to  furnish  to  the  Company  a  completed  Selling Stockholder Questionnaire not more than five (5) Business Days following the date of this
 
Agreement. At least ten (10) Business Days prior to the first anticipated filing date of a Registration Statement for any registration under this Agreement, the Company will notify each Holder of the information the Company requires from that Holder other than the information contained in the Selling Stockholder Questionnaire, if any, which shall be completed and delivered to the Company promptly upon request and, in any event, within three (3) Business Days prior to the applicable anticipated filing date.  Each Holder further agrees that it shall not be entitled to be named as a selling securityholder in the Registration Statement or use the Prospectus for offers and resales of Registrable Securities at any time, unless such Holder has returned to the Company a completed and signed Selling Stockholder Questionnaire and a response to any requests for further information as described in the previous sentence. If a Holder of Registrable Securities returns a Selling Stockholder Questionnaire or a request for further information, in either case, after its respective deadline, the Company shall use its best efforts to take such actions as are required to name such Holder as a selling security holder in the Registration Statement or any pre-effective or post-effective amendment thereto and to include (to the extent not theretofore included) in the Registration Statement the Registrable Securities identified in such late Selling Stockholder Questionnaire or request for further information. Each Holder acknowledges and agrees that the information in the Selling Stockholder Questionnaire or request for further information as described in this Section 5(a) will be used by the Company in the preparation of the Registration Statement and hereby consents to the inclusion of such information in the Registration Statement.
 
 
Exhibit C, Page 8

 

 
(b)      Each Holder, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Holder has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

(c)       Each Holder agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to Section 3(h) hereof, such Holder will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Holder is advised by the Company that such dispositions may again be made.
 
6.            Indemnification .
 
(a)        Indemnification   by   the   Company .  The Company will indemnify and hold harmless each Holder and its officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Holder within the meaning of the 1933
Act, against any losses, claims, damages or liabilities, joint or several, to which they may
 
become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement or omission or alleged omission of any material fact contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading;  (iv)  any  violation  by  the  Company  or  its  agents  of  any  rule  or  regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration Statement in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Holder’s behalf and will reimburse such Holder, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Holder or any such controlling person in writing specifically for use in such Registration Statement or Prospectus.

(b)        Indemnification   by   the   Holders .   Each Holder agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to  the extent, but only to  the extent that such untrue statement or omission is contained in any information furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto.  In no event shall the liability of an Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 6 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.
 
 
Exhibit C, Page 9

 

 
(c)      Conduct   of   Indemnification Proceedings .    Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided , further , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation.  It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties.  No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

(d)        Contribution .   If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations.  No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
 
 
Exhibit C, Page 10

 
 
7.            Miscellaneous .
 
(a)        Amendments   and   Waivers .  This Agreement may be amended only by a writing signed by the Company and the Required Holders.  The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Required Holders.

(b)        Notices .  All notices and other communications provided for or permitted hereunder shall be made as set forth in the JV Agreement.

(c)        Assignments   and   Transfers   by   Holders .  The provisions of this Agreement shall be binding upon and inure to the benefit of the Holders and their respective successors and assigns.  An Holder may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Holder to such person, provided that such Holder complies with all laws applicable thereto and provides  written  notice  of  assignment  to  the  Company  promptly  after  such  assignment  is effected.
 
(d)        Assignments   and   Transfers   by   the   Company .  This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Holders, provided, however, that in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person and the term “Registrable Securities” shall be deemed to include the securities received by the Holders in connection with such transaction unless such securities are otherwise freely tradable by the Holders after giving effect to such transaction.

(e)        Benefits   of   the   Agreement .  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
 
 
Exhibit C, Page 11

 

 
(f)         Counterparts;   Faxes .   This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed via facsimile, which shall be deemed an original.

(g)        Titles   and   Subtitles .  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(h)       Severability .   Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.   To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.

(i)         Further   Assurances .  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

(j)         Entire   Agreement .  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
 
 
Exhibit C, Page 12

 
 
(k)        Governing   Law;   Consent   to   Jurisdiction;  Waiver   of   Jury   Trial .    All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, employees or agents) shall be commenced in the state and federal courts sitting in the County of Clark (the “Clark County Courts”).   Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Clark County Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Clark County Courts, or Clark County Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.   Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses reasonably incurred in the investigation, preparation and prosecution of such action or proceeding.
 
(l)       Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH   OF   THE   PARTIES   HERETO   WAIVES   ANY   RIGHT   TO REQUEST A   TRIAL   BY   JURY   IN   ANY   LITIGATION   WITH   RESPECT   TO   THIS AGREEMENT AND   REPRESENTS   THAT   COUNSEL   HAS   BEEN   CONSULTED SPECIFICALLY   AS TO   THIS   WAIVER.

(m)       No   Inconsistent   Agreements .  Neither  the  Company  nor  any  of  its subsidiaries has entered, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  Neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.
 
 
Exhibit C, Page 13

 
 
(n)        Independent   Nature   of   Holders’   Obligations   and   Rights . The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder.  It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.
 
 
Exhibit C, Page 14

 
 
IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.
 


 
The Company:    GROWLIFE, INC.  
       
       
  By: /s/ Sterling Scott  
  Name: Sterling Scott  
  Title:   Chief Executive Officer  
       
 
 

 
[Company signature page to Registration Rights Agreement]

 


 
Exhibit C, Page 15

 
 
 

 
Holder:   CANX USA LLC  
       
       
  By: /s/  
  Name:  
  Title:     
       


 

 
[Purchaser signature page to Registration Rights Agreement]

 
 
Exhibit C, Page 16

 
 
Exhibit   A


Plan of Distribution
 
The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions.  These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
 
The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:
 
 
ordinary brokerage transactions and transactions in which the broker-dealer solicits Holders;
 
 
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
 
 
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 
 
an  exchange  distribution  in  accordance  with  the  rules  of  the  applicable exchange;
 
 
 privately negotiated transactions;  
 
 
short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the Commission;
 
 
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
 
 
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
 
 
a combination of any such methods of sale; and
 
 
any other method permitted by applicable law.
 
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common  stock,  from  time  to  time,  under  this  prospectus,  or  under  an  amendment to  this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.  The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 
Exhibit C, Page 17

 
 

In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker- dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer  or  other  financial  institution  may  resell  pursuant  to  this  prospectus  (as supplemented or amended to reflect such transaction).
 
The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any.   Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents.   We will not receive any of the proceeds from this offering. Upon any exercise of the warrants by payment of cash, however, we will receive the exercise price of the warrants.

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be "underwriters" within the meaning of Section 2(11) of the Securities Act.  Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act.   Selling stockholders who are "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents,  dealer  or  underwriter,  any  applicable  commissions  or  discounts  with  respect  to  a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
 
 
Exhibit C, Page 18

 

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.   The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
 
We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.
 
We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which all of the shares may be sold without restriction pursuant to Rule 144 of the Securities Act.
 
 
 
 
 
 

 
 
Exhibit C, Page 19

 
 
Exhibit   B
 

 
SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE
 

The  undersigned  holder  of  shares  of  the  common  stock,  par  value  $0.0001  per  share  of GrowLife, Inc. (the “ Company ”) issued pursuant to a certain Warrant issued pursuant to the Joint Venture  Agreement  by  and  among  the  Company  and  the  CANX  USA  LLC,  dated  as  of November 19, 2013, understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-1 (the “ Resale   Registration Statement ”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities   Act ”), of the Registrable Securities in accordance with the terms of a certain Registration Rights Agreement by and among the Company and the Holders named therein, dated as of November 19, 2013 (the “ Agreement ”). All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Agreement.
 
In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the “ Prospectus ”), deliver the Prospectus to Holders of Registrable Securities (including pursuant to  Rule  172  under  the  Securities Act)  and  be  bound  by  the  provisions  of  the  Agreement (including certain indemnification provisions, as described below).  Holders must complete and deliver this Notice and Questionnaire in order to be named as selling stockholders in the Prospectus.   Holders of Registrable Securities who do not complete, execute and return this Notice and Questionnaire within five (5) Trading Days following the date of the Agreement (1) will not be named as selling stockholders in the Resale Registration Statement or the Prospectus and (2) may not use the Prospectus for resales of Registrable Securities.

Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus.  Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not named as a selling stockholder in the Resale Registration Statement and the Prospectus.
 

NOTICE
 

The undersigned holder (the “ Selling Stockholder ”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Item (3), unless otherwise specified in Item (3), pursuant to the Resale Registration Statement.    The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire and the Agreement.
 
The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

 
 
Exhibit C, Page 20

 
 
 
QUESTIONNAIRE
 
a)         Name:    
       
  (1)  Full Legal Name of Selling Stockholder:  
       
       
       
       
  (2)  Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held:
       
       
       
       
  (3)  Full Legal Name of Natural Control Person (which means a natural person who directly or  indirectly alone  or  with  others  has  power  to  vote  or  dispose  of  the securities covered by the questionnaire):
       
       
 
 
 
 
 
 
 
Exhibit C, Page 21