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): March 2, 2016
VAPE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 333-163290 | 90-0436540 | ||
| (State of other jurisdiction | (Commission | (IRS Employer | ||
| of incorporation) | File Number) | Identification No.) |
5304 Derry Ave., Unit C
Agoura Hills, CA 91301
(Address of principal executive office)
1-877-827-3959
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)
☐ 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 |
On March 7, 2016, Vape Holdings, Inc., a Delaware corporation (the “Company”), GHS Investments, LLC (“GHS”) and JSJ Investments, Inc. (“JSJ”) entered into a series of agreements whereby $119,806 in convertible debt (the “Debt”) owed to JSJ was assigned to GHS (the “Transaction”). The transaction closed and funded in full on March 14, 2016.
In connection with the Transaction, JSJ assigned all right, titled and interest in $119,806 in Debt to GHS pursuant to an assignment agreement in exchange for payment in cash of $119,806. A copy of the Assignment Agreement with JSJ is attached hereto as Exhibit 10.2. In addition, JSJ assigned all rights in its Irrevocable Transfer Agent Letter. A copy of the Irrevocable Transfer Agent Letter Assignment Agreement is attached hereto as Exhibit 10.3.
This assignment of Debt from JSJ to GHS was documented by a new convertible promissory note by and between the Company and GHS to amend and replace the Company’s previous convertible promissory note with JSJ which was retired and terminated in connection therewith. A copy of the Convertible Promissory note with GHS regarding the JSJ Debt is attached hereto as Exhibit 10.1.
An aggregate of approximately $440,000 in convertible debt has been restructured and assigned to GHS to date. No new capital was provided to the Company in connection with the Transaction. All references to the Transaction herein are qualified in their entirety by reference to the exhibits attached hereto and incorporated by reference herein.
| Item 1.02 | Termination of a Material Definitive Agreement |
The JSJ note was terminated in connection with the Transaction. See Item 1.01.
| Item 3.02 | Unregistered Sales of Equity Securities |
A convertible promissory note was issued to GHS to replace those terminated in connection with the assignment of the Debt from JSJ to GHS. See Item 1.01.
In addition, on March 10, 2016, the Company’s CEO, Justin Braune, converted $3,750 in accrued salary into 750,000 shares of the Company’s common stock at $0.005 per share which was the fair market value of a share of the Company’s common stock on the date of grant.
The Company has also issued the following shares of its common stock pursuant to conversions of convertible notes since the filing of its Quarterly Report on Form 10-Q filed on February 22, 2016:
On March 2, 2016, the Company issued 10,169,800 shares of its common stock pursuant to a conversion notice from a noteholder in the amount of $10,627.44.
On March 10, 2016, the Company issued 10,702,619 shares of its common stock pursuant to a conversion notice from a noteholder in the amount of $11,184.23.
The original issuances of the above convertible notes and related amendments were previously disclosed on our Current Report on Form 8-K dated December 8, 2014 and in our Quarterly Reports on Form 10-Q dated May 20, 2014, February 17, 2015 and August 14, 2015, respectively, which disclosures are incorporated by reference herein.
In making the above sales without registration, we relied upon the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
As of March 15, 2016, the total number of shares outstanding of the Company’s common stock was 214,990,034.
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| Item 8.01 | Other Events |
On March 15, 2016, the Company issued a press release regarding the debt restructuring transaction. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
| Exhibit Number |
Description | |
| 10.1 | Convertible Promissory Note by and between GHS Investments, LLC and the Company, dated March 7, 2016. | |
| 10.2 | Assignment Agreement by and between GHS Investments, LLC and JSJ Investments, Inc., dated March 7, 2016. | |
| 10.3 | Irrevocable Transfer Agent Letter Assignment Agreement by and between GHS Investments, LLC and JSJ Investments, Inc., dated March 7, 2016. | |
| 99.1. | Press Release, dated March 15, 2016. |
| 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.
| VAPE HOLDINGS, INC. | ||
| Dated: March 15, 2016 | By: | /s/ Justin Braune |
| Justin Braune | ||
| Duly Authorized Officer, Chief Executive Officer | ||
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Exhibit 10.1
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: $119,806
Date: March 7, 2016 (Tacking Back to August 5, 2015)
CONVERTIBLE PROMISSORY NOTE
Vape Holdings, Inc., (hereinafter called the “Company” or “VAPE”), hereby promises to pay to the order of GHS Investments, LLC, a Nevada Limited Liability Company, or its registered assigns (the “Holder”) the sum of $119,806 together with any interest as set forth herein, on October 7, 2016 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.
This Note shall serve in lieu of (and tack back to) $119,806 of convertible debt owing to JSJ Investments, Inc., pursuant to that certain $112,000 Convertible Promissory Note dated August 5, 2015, as amended, and incorporate all interests and charges contemplated therein.
This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock) shall be made in lawful money of the United States of America.
All payments shall be made at such address as the Holder shall hereafter give to the Company by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in the supporting documents of same date (attached hereto).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right and at any time following the execution of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. Notwithstanding the foregoing, the term "4.99%" above shall be replaced with "9.99%" following any Event of Default if the Holder, in its sole discretion and in writing, elects to demand the replacement. If the term "4.99%" is replaced with "9.99%" pursuant to the preceding sentence, such increase to "9.99%" shall remain at 9.99% until decreased by the Holder in writing.
The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, (the “Notice of Conversion”), delivered to the Company by the Holder in accordance with the Sections below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”).
The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder.
1.2 Conversion Price.
(a) Calculation of Conversion Price. Subject to the adjustments set forth herein, Holder, at its discretion, shall have the right to convert this Note in its entirety or in part(s) into common stock of the Company valued at a forty five percent (45%) discount off of the lowest intra-day trading price for the Company’s common stock during the twenty (20) trading days immediately preceding a conversion date, as reported by Quotestream.
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If at any time after the execution of this Note, the Company experiences a "DTC Chill," the Conversion Price Discount shall be increased by five percent (5%). If at any time following the execution of this Note, the Company becomes ineligible to participate in the DTC's "DWAC" system, the Conversion Price Discount will be increased by five percent (5%). If the Company experiences both a "DTC Chill" and DWAC ineligibility, the Holder shall have the right to Convert this Note in its entirety or in part(s) into common stock of the Company valued at a fifty five percent (55%) discount off of the lowest intra-day trading price for the Company's common stock during the twenty (20) trading days immediately preceding the relevant Notice of Conversion.
1.3 Authorized Shares. The Company covenants that during the period the conversion right exists the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. The Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Company’s obligations.
The Company represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Company shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Company shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes.
The Company (i) acknowledges that it will irrevocably instruct its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.
If, at any time the Company does not maintain the Reserved Amount it will be considered an Event of Default as defined in this Note.
1.4 Method of Conversion.
(a) Mechanics of Conversion. This Note may be converted by the Holder in whole or in part at any time from time to time after the execution of the Note, by (A) submitting to the Company a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time).
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(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless the entire unpaid principal amount of this Note is so converted. The Holder and the Company shall maintain records showing the principal amount so 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 each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. The Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Company shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Company the amount of any such tax or shall have established to the satisfaction of the Company that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Company from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section, the Company shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.
Within Five (5) business days of having received common stock pursuant to a Notice of Conversion and prior to having traded any shares from that specific Notice of Conversion, Holder may elect to rescind the Notice of Conversion and return the shares, at Holder's expense, to the Company's Transfer Agent. In the event of such rescission, the principal amount outstanding under this Note shall be adjusted to include the Conversion Amount which was deducted from the Note as part of the rescinded Notice of Conversion.
(e) Obligation of Company to Deliver Common Stock. Upon receipt by the Company of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Company’s obligation to issue and deliver the Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Company before 6:00 p.m., New York, New York time, on such date.
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(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Company is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.
(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline the Company shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Company fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Company by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Company agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section are justified. Any delay or failure of performance by the Company hereunder shall be excused if and to the extent caused by Force Majeure. For purposes of this agreement, Force Majeure shall mean a cause or event that is not reasonably foreseeable and/or caused by the Company, including acts of God, fires, floods, explosions, riots wars, hurricanes, etc.
1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Company or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Company who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor. Except as otherwise provided herein (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
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“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above shall be removed and the Company shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Company or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to this note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Company, the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or the consolidation, merger or other business combination of the Company with or into any other Person (as defined below) or Persons when the Company is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Company shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
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(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Company or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Company shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment Due to Distribution. If the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Company’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock in connection with a financing transaction based on a variable price formula (the “Alternative Variable Price Formula”) that is more favorable to the investor in such financing transaction than the formula for calculating the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the formula for the Conversion Price will be adjusted to match the Alternative Variable Price Formula. If it is unclear whether the Alternative Variable Price Formula is better or worse, then Holder, in its sole discretion, may elect at the time of such issuance whether to switch to the Alternative Variable Price Formula or not.
(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Company issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
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(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Company, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder of a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.
1.7 Omit
1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Company shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Company’s failure to convert this Note.
1.9 Prepayment. Maker may prepay this Note where both parties have agreed to said prepayment in writing.
ARTICLE II. CERTAIN COVENANTS
2.1 Distributions on Capital Stock. So long as the Company shall have any obligation under this Note, the Company shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Company’s disinterested directors.
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2.2 Restriction on Stock Repurchases. So long as the Company shall have any obligation under this Note, the Company shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Company or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings. So long as the Issuer shall have any obligation under this Note, the Issuer shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Issuer has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.
2.4 Sale of Assets. So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.5 Advances and Loans. So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Company, except loans, credits or advances (a) in existence or committed on the date hereof and which the Company has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an “Event of Default”) shall occur:
3.1 Failure to Pay Principal or Interest. The Company fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
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3.2 Conversion and the Shares. The Company fails to issue shares of Common Stock to the Holder (or announces or threatens that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Company directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Company to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Company to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Company’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Company to the Holder within forty eight (48) hours of a demand from the Holder.
3.3 Breach of Covenants. The Company breaches any covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Company made herein or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.5 Receiver or Trustee. The Company or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Company or any subsidiary of the Company or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company.
3.8 Delisting of Common Stock. The Company shall fail to maintain the listing of the Common Stock, in good standing, on the OTC Markets or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.
3.9 Failure to Comply with the Exchange Act. The Company shall fail to comply with the reporting requirements of the Exchange Act; and/or the Company shall cease to be subject to the reporting requirements of the Exchange Act. The Company shall fail to timely file a 10Q or 10K.
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3.10 Liquidation. Any dissolution, liquidation, or winding up of Company or any substantial portion of its business.
3.11 Cessation of Operations. Any cessation of operations by Company or Company admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Company’s ability to continue as a “going concern” shall not be an admission that the Company cannot pay its debts as they become due.
3.12 Maintenance of Assets. The failure by Company to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Company with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the original financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or supporting documents.
3.14 Reverse Splits. The Company effectuates a reverse split of its Common Stock without at least twenty (20) days prior written notice to the Holder.
3.15 Replacement of Transfer Agent. In the event that the Company proposes to replace its transfer agent, the Company fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Company and the Company.
3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Company of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Company, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Company, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Company.
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Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE COMPANY SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Company by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
If the Company fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Company remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect.
As security for payment and performance of the Company's obligations pursuant to this Note and supporting documents, Holder, following any Event of Default, shall be granted an unconditional security interest in and to, any and all property of the Company (and its subsidiaries), of any kind or description, tangible or intangible, whether now existing or hereafter arising or acquired.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
Vape Holdings, Inc.
5304 Derry Ave.
Suite C
Agoura Hills, CA 91301
If to the Holder:
GHS Investments, LLC.
200 Stonehinge Lane Suite 3
Carle Place, NY 11514
718.530.0182
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4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.
4.5 Cost of Collection. If default is made in the payment of this Note, the Company shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Nevada or in the federal courts located in the state.. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document 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 Agreement 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 law.
4.7 Certain Amounts. Whenever pursuant to this Note the Company is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Company and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Company represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Company and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Assignment Agreement and supporting documents.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Company shall provide the Holder with prior notification of any meeting of the Company’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Company of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Company or any proposed liquidation, dissolution or winding up of the Company, the Company shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Company shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
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4.10 Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, Company has caused this Note to be signed in its name by its duly authorized officer:
| Vape Holdings, Inc. | ||
| By: | /s/ Justin Braune | |
| Print: | Justin Braune | |
| Title/Date: | CEO | |
14
Exhibit 10.2
ASSIGNMENT OF DEBT AGREEMENT
THIS ASSIGNMENT OF DEBT AGREEMENT (this “Agreement”) dated this 7th day of March 2016.
Between:
GHS Investments, LLC, a Nevada limited liability company
(“ASSIGNEE")
AND:
JSJ Investments, Inc., a Texas corporation located at
6060 North Central Expressway, Suite 500,
Dallas, Texas 75206
("ASSIGNOR")
AND:
VAPE Holdings, Inc., located at
5304
Derry Ave.,
Unit C
Agoura Hills, CA 91301
("DEBTOR")
WHEREAS:
A.
Debtor is currently indebted to Assignor for $119,806 pursuant to that certain $112,000 "12% Convertible Note" dated
August 5, 2016, as amended ("Note");
B. Assignee wishes to purchase $119,806 worth of outstanding balance owing pursuant to the Note, Debtor consents to the transaction as contemplated herein, and Assignor wishes to assign and transfer unto Assignee $119,806 of convertible debt ("Assigned Debt") upon the terms and conditions contained in this Agreement and supporting documents (attached).
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises,
mutual promises, representations and warranties contained herein and for other good and valuable consideration, the receipt of which are acknowledged, and subject to the terms and conditions hereinafter set out, the parties agree as follows:
1. ASSIGNMENT OF THE DEBT
1.1 Upon Assignor’s receipt of the Purchase Price (defined below), Assignor grants, transfers and sets over unto Assignee its right, title and interest in and to the Assigned Debt, including, without limitation, all rights, benefits and advantages of Assignor to be derived herefrom and all burdens, obligations and liabilities to be derived thereunder, in consideration of the premises and the consideration set out in Section 1.2.
Assignment of Debt Agreement [Page 1 of 7]
1.2. Assignee is purchasing the $119,806 worth of convertible debt for $119,806 (the “Purchase Price”). The Purchase Price is payable by Assignee to Assignor via wire transfer of immediately available funds as follows: (a) $119,806 on or before March 14, 2016 (the “Closing Date”).
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNOR
2.1 Assignor represents, warrants and covenants to Assignee that:
(a) the above premises are true and complete;
(b) Assignor is duly organized and validly existing under the laws of the jurisdiction of its formation, and has the requisite power and authority to enter into this Agreement and perform its obligations hereunder and each other document contemplated hereby to which Assignor is or will be a party and to consummate the transactions contemplated hereby and thereby;
(c) The execution, delivery and performance by Assignor of this Agreement and the transactions contemplated hereby (i) have been duly authorized by all necessary officers, managers or members of Assignor, (ii) do not contravene the terms of Assignor’s organizational documents, or any amendment thereof, (iii) do not materially violate, conflict with or result in any material breach or contravention of, or the creation of any lien under, any contractual obligation of Assignor or any requirement of law applicable to Assignor, and (iv) do not materially violate any orders of any governmental authority against, or binding upon, Assignor to the knowledge of Assignor;
(d) This Agreement has been duly executed and delivered by Assignor and constitutes the legal, valid and binding obligations of Assignor, enforceable against Assignor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity);
(e) Assignor is an “Accredited Investor” within the meaning of Rule 501 of Regulation D under the Securities Act, as presently in effect;
(f) There are no brokerage commissions, finder’s fees or similar fees or commissions payable by any party in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Assignor or any action taken by Assignor;
(g) the full amount of the Assigned Debt is due and owing by Debtor to Assignor; and
(h) Assignor now has a lawful right, full power and absolute authority to assign its/an unencumbered right, title and interest in and to the Assigned Debt in the manner setout in Article 1 hereof, according to the true intent and meaning of this Agreement.
Assignment of Debt Agreement [Page 2 of 7]
2.2 The representations, warranties and covenants contained in Section 2.1 are provided for the exclusive benefit of Assignee, its affiliates and agents and a breach of any one or more thereof may be waived by Assignee in whole or in part at any time without prejudice to its rights in respect to any other breach of the same or any other representation or warranty or covenant. Any representations, warranties and covenants contained in Article 2 will survive the signing of this Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNEE
3.1 Assignee represents, warrants and covenants to Assignor that:
(a) The above premises are true and complete;
(b) Assignee is duly organized and validly existing under the laws of the jurisdiction of its formation, and has the requisite power and authority to enter into this Agreement and perform its obligations hereunder and each other document contemplated hereby to which Assignee is or will be a party and to consummate the transactions contemplated hereby and thereby;
(c) The execution, delivery and performance by Assignee of this Agreement and the transactions contemplated hereby (i) have been duly authorized by all necessary officers, managers or members of Assignee, (ii) do not contravene the terms of Assignee’s organizational documents, or any amendment thereof, (iii) do not materially violate, conflict with or result in any material breach or contravention of, or the creation of any lien under, any contractual obligation of Assignee or any requirement of law applicable to Assignee, and (iv) do not materially violate any orders of any governmental authority against, or binding upon, Assignee to the knowledge of Assignee;
(d) This Agreement has been duly executed and delivered by Assignee and constitutes the legal, valid and binding obligations of Assignee, enforceable against Assignee in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity);
(e) Assignee understands that the Assigned Debt will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) at the time of purchase and, therefore, cannot be resold unless it is registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. Assignee is aware that Debtor is under no obligation to effect any such registration with respect to the Assigned Debt or to file for or comply with any exemption from registration. Assignee has not been formed solely for the purpose of making this investment . Assignee has such knowledge and experience in financial and business matters that Assignee is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time;
Assignment of Debt Agreement [Page 3 of 7]
(f) Assignee is an “Accredited Investor” within the meaning of Rule 501 of Regulation D under the Securities Act, as presently in effect;
(g) There are no brokerage commissions, finder’s fees or similar fees or commissions payable by any party in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Assignee or any action taken by Assignee;
(h) Assignee has been furnished with, and has had access to, such information as it considers necessary or appropriate for deciding whether to enter into this Agreement Assignee has had the opportunity to consult with counsel of its choosing with respect to this Agreement and the Assigned Debt. No representations or warranties have been made to Assignee by Assignor, or any of its respective officers, employees, agents, sub-agents, affiliates or subsidiaries, other than the representations of Assignor contained in this Agreement and supporting documents.
(i) Assignee is aware that its purchase of the Assigned Debt pursuant to this Agreement is a speculative investment that is subject to the risk of complete loss. Assignee is able, without impairing Assignee’s financial condition, to suffer a complete loss of such investment in Debtor.
(j) Assignee acknowledges and agrees that it shall be solely responsible to obtain any legal opinion necessary to clear shares of common stock issuable to Assignee upon any conversion of the Assigned Debt.
3.2 The representations, warranties and covenants contained in Section 3.1 are provided for the exclusive benefit of Assignor and a breach of any one or more thereof may be waived by Assignor in whole or in part at any time without prejudice to its rights in respect to any other breach of the same or any other representation or warranty or covenant.
4. CONSENT OF DEBTOR
4.1 Debtor, having received no additional consideration for this Assignment, agrees and consents to the assignment of Assignor's interests in the Assigned Debt to Assignee pursuant to the terms and conditions of this Agreement.
4.2 Debtor represents, warrants and covenants to Assignee that (a) the full amount of the Assigned Debt is due and owing at the time of this Agreement, and (b) the Assigned Debt has not been prepaid in full or in part.
4.3 Debtor agrees that Assignee is entitled to convert the debt and make demand for any and all documentation needed to assign, convert, sell and/or transfer the Assigned Debt.
4.4. Debtor agrees to take any action required to accommodate any of the rights assigned to Assignee in this Agreement.
Assignment of Debt Agreement [Page 4 of 7]
5. MISCELLANEOUS
5.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Agreement (or its signature page thereof) will be deemed to be an executed original thereof.
5.2 No failure or delay on the part of a party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by Assignor or Assignee from the terms of any provision of this Agreement, shall be effective (a) only if it is made or given in writing and signed by Assignor and Assignee, and (b) only in the specific instance and for the specific purpose for which made or given.
5.3 If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.
5.4 This Agreement, together with all other documents contemplated hereunder, are 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 and therein. There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement and all such other contemplated documents supersede all prior agreements and understandings between the parties with respect to such subject matter.
5.5 Assignee acknowledges and agrees that neither Assignor nor any of its officers, directors, representatives or agents has made any representations or warranties to Assignee or any of its agents, representatives, officers, directors, managers, members or employees except as expressly set forth in this Agreement and supporting documents, and, in making its decision to enter into the transactions contemplated by this Agreement, Assignee is not relying on any representation, warranty, covenant or promise of Assignor or its officers, directors, agents or representatives other than as set forth in this Agreement and supporting documents.
5.6 All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits hereto shall be governed by, and construed in accordance with, the laws of the State of Texas without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. In furtherance of the foregoing, the internal law of the State of Texas shall control the interpretation and construction of this Agreement (and all exhibits hereto), even though under that jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.
Assignment of Debt Agreement [Page 5 of 7]
5.7 Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in Texas in any proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the exclusive personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing.
5.8 If any action at law or in equity is brought by a party to enforce or interpret the terms of this Agreement or any other document contemplated hereby, the Prevailing Party (defined below) shall be entitled to reasonable attorneys’ fees, costs and disbursements, in addition to any other relief to which such party may be entitled. “Prevailing Party” shall mean the party in any litigation or enforcement action that prevails in the highest number of final rulings, counts or judgments adjudicated by a court of competent jurisdiction.
5.9 This Agreement is the mutual product of the parties hereto, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the parties, and shall not be construed for or against any party hereto.
5.10 This Agreement may be terminated by Assignor, in its sole discretion upon written notice to Assignee, if Assignee fails to pay the Purchase Price to Assignor by the Closing Date, at the latest.
5.11 All notices to be given hereunder shall be in writing, to the Parties at the addresses set forth in this Agreement and shall be given or made by mailing the same by certified mail, return receipt requested or by other nationally recognized overnight courier utilizing a written receipt or other valid written proof of delivery, or by hand delivery utilizing a written receipt. Either Party may designate by notice, in writing, a new or other address to which such notice or demand shall thereafter be so given, made or mailed. All notices shall be effective when delivered by the post office or courier service.
SIGNATURE PAGE TO FOLLOW
Assignment of Debt Agreement [Page 6 of 7]
IN WITNESS WHEREOF this agreement was signed by the parties hereto as of the day and year first above written.
DEBTOR (VAPE Holdings, Inc.)
/s/ Justin Braune
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AUTHORIZED SIGNATORY – (Name and Title:_____Justin Braune, CEO______________)
ASSIGNOR (JSJ Investments, Inc.)
/s/ Sameer Hirji
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AUTHORIZED SIGNATORY – (Name and Title: ____Sameer Hirji, President______________)
ASSIGNEE (GHS Investments, LLC)
/s/ Mark Grober
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AUTHORIZED SIGNATORY– (Name and Title:____Mark Grober, Member_______________)
Assignment of Debt Agreement [Page 7 of 7]
Exhibit 10.3
IRREVOCABLE LETTER OF INSTRUCTIONS TO TRANSFER AGENT ASSIGNMENT AGREEMENT
This IRREVOCABLE LETTER OF INSTRUCTIONS TO TRANSFER AGENT ASSIGNMENT AGREEMENT (the “Assignment Agreement”) is effective as of this 7th day of March, 2016 (the “Effective Date”) by and between JSJ INVESTMENTS, INC. (“Assignor”) and GHS INVESTMENTS, LLC (“Assignee”) (collectively, “Parties”).
WHEREAS, on March 7, 2016, Assignor assigned all right, title and interest in $119,806 in convertible debt owing to Assignor pursuant that certain $112,000 Convertible Promissory Note dated August 5, 2015 (the “Note”) to Assignee (the “Assignment of Debt Agreement”) a copy of which is attached hereto as Exhibit “A”;
WHEREAS, in connection with the Note, Assignor was granted a transfer agent share reserve (the “Share Reserve”) pursuant to that certain Irrevocable Letter of Instructions to Transfer Agent (“Transfer Agent Letter’) dated August 5, 2015, a copy of which is attached hereto as Exhibit “B”;
WHEREAS, in connection with the Assignment of Debt Agreement, Assignor and Assignee desire to have Assignor assign and transfer the rights and interest in the Transfer Agent Letter and the Share Reserve to Assignee which agreement is documented in this Assignment Agreement;
NOW THEREFORE, for good and valuable consideration exchanged, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. ASSIGNMENT. For valuable consideration, the receipt and sufficiency of which is acknowledged, Assignor does hereby irrevocably assign, transfer, sell, convey and deliver to Assignee, its successors and assigns, Assignor’s entire ownership rights, title, interest and priority in and to the Transfer Agent Letter and corresponding Share Reserve, including any right, title or interest to reserved shares thereunder (the “Assignment”).
2. CONSIDERATION. In consideration for the Assignment, Assignee has paid $119,806 to Assignor under the Assignment of Debt Agreement.
3. CLOSING. Per the terms of the Assignment of Debt Agreement and this Assignment Agreement, the $119,806 being paid by Assignee to Assignor will occur on March 14, 2016 (the “Closing”). It is understood and agreed that the Share Reserve and the rights and obligations associated with the Transfer Agent Letter will not be assigned to Assignee until the Closing has occurred on March 14, 2016 and the consideration has been paid in full.
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4. REPRESENTATIONS AND WARRANTIES. Assignor represents, warrants and covenants to Assignee:
a. Assignor has the right, power and authority to enter into this Assignment Agreement;
b. Assignor is the exclusive owner of all right, title and interest in the Share Reserve;
c. The Transfer Agent Letter and Share Reserve is free and clear of any liens, security interests, encumbrances or licenses;
d. Assignor is not subject to any agreement, judgment or order inconsistent with the terms of this Assignment Agreement.
5. ENTIRE AGREEMENT. This Assignment Agreement contains the entire understanding of the parties hereto with respect to its subject matter and supersedes any prior or contemporaneous written or oral agreements, representations or warranties between the parties.
6. AMENDMENT. This Assignment Agreement may only be amended by a written agreement signed by both parties which explicitly adjoins itself to this Assignment Agreement.
7. SEVERABILITY. If any term, provision, covenant or condition of this Assignment Agreement, or the application thereof to any person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, such provision shall be severed from this Assignment Agreement, and the remainder of this Assignment Agreement and such term, provision, covenant or condition as applied to other persons, places and circumstances shall remain in full force and effect.
8. GOVERNING LAW. This Assignment Agreement shall be construed in accordance with the laws of the State of Texas, without regards to principles of conflicts of laws.
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IN WITNESS WHEREOF, the Parties have caused this Assignment Agreement to be executed effective as of the day and year first above written.
| ASSIGNOR | ASSIGNEE | |||
| /s/ Sameer Hirji | /s/ Mark Grober | |||
| JSJ Investments, Inc. | GHS Investments, LLC | |||
| By: | Sameer Hirji | By: | Mark Grober | |
| Title: | President | Title: | Member | |
ACKNOWLEDGED AND AGREED BY:
COMPANY:
VAPE HOLDINGS, INC.
| / s/ Justin Braune | ||
| By: | Justin Braune | |
| Title: | CEO | |
TRANSFER AGENT:
ISLAND STOCK TRANSFER
| / s/ Justeene Blankenship | ||
| By: | Justeene Blankenship | |
| Title: | President | |
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EXHIBIT “A”
[ASSIGNMENT OF DEBT AGREEMENT]
EXHIBIT “B”
[TRANSFER AGENT LETTER]
Exhibit 99.1
VAPE Holdings Announces Closing of Second Round of
Debt Restructure and Consolidation
AGOURA HILLS, CA--(Marketwired - Mar 15, 2016) - VAPE Holdings, Inc. (OTCQB: VAPE) (the "Company" or "VAPE"), a holding company focused on providing healthy, efficient, and sustainable vaporization products, announced today the closing of the second tranche of a debt restructuring and consolidation plan targeting the Company's approximately $1,000,000 in convertible debt.
On March 14, 2016, the Company closed and funded the debt buy-out and restructure of an additional $119,806 in convertible debt of JSJ Investments, Inc. for an aggregate total of approximately $440,000 in debt restructured to date. This represents the second tranche of a proposed complete restructuring and consolidation of the Company's convertible debt into one long term financing partner.
"This latest round of restructuring and refinancing puts VAPE in a much more stable financial position. This represents approximately half of the debt incurred prior to my joining the Company. This is very exciting as it allows us to focus even more attention to growing our core businesses: Revival, Hive Ceramics, and the launching of our branded CBD line that is in the final stages of development,” stated Justin Braune, CEO of VAPE.
About VAPE Holdings, Inc.
VAPE Holdings, Inc. focuses on designing, marketing, and distributing various vaporization products. The company offers medical and food grade ceramic products primarily under the HIVE Ceramics brand throughout North America, Europe and South America. HIVE offers a nonporous, non-corrosive, chemically inert ceramic vaporization element, which can be used for a range of applications, including stand-alone vaporization products and electronic cigarettes. The company is based in Agoura Hills, California.
For more information on HIVE Ceramics and to visit our e-commerce site, please visit: http://www.hiveceramics.com.
For more information on Revival and to visit our e-commerce site, please visit: http://www.revivalvapes.com.
From time to time, VAPE Holdings will provide market updates and news via its websitehttp://www.vapeholdings.com/ or the Company's Facebook page at http://on.fb.me/1d5c7iO.
Cautionary Language Concerning Forward-Looking Statements
This release contains "forward-looking statements" that include information relating to future events and future financial and operating performance. The words "may," "would," "will," "expect," "estimate," "can," "believe," "potential" and similar expressions and variations thereof are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to: fluctuations in demand for VAPE Holdings' products, the introduction of new products, the Company's ability to maintain customer and strategic business relationships, the impact of competitive products and pricing, growth in targeted markets, the adequacy of the Company's liquidity and financial strength to support its growth, and other information that may be detailed from time-to-time in VAPE Holdings' filings with the United States Securities and Exchange Commission. Examples of such forward-looking statements in this release include statements regarding future sales, costs and market acceptance of products as well as regulatory actions at the State or Federal level. For a more detailed description of the risk factors and uncertainties affecting VAPE Holdings please refer to the Company's Securities and Exchange Commission filings, which are available at www.sec.gov. VAPE Holdings undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Contact:
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(888) 518-3274