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): July 15, 2016
VAPOR HUB INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
000-55363 |
| 27-3191889 |
(Commission File Number) |
| (IRS Employer Identification No.) |
1871 Tapo Street
Simi Valley, CA 93063
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code (805) 309-0530
N/A
(Former Name or Former Address, 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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
1
Item 1.01 Entry into a Material Definitive Agreement
On July 15, 2016, Vapor Hub International Inc. (the “Company”) entered into an Exchange Agreement (the “Exchange Agreement”) with Iliad Research and Trading L.P. (“Iliad”). The Exchange Agreement relates to the Promissory Note issued on August 12, 2015 to Iliad in the original principal amount of $245,000 (the “Original Note”), which Iliad and the Company exchanged for a new Promissory Note in the original principal amount of $272,250 on May 12, 2016, having an original issue date of August 12, 2015 (the “First Exchange Note”).
Pursuant to the Exchange Agreement, the Company and Iliad exchanged the First Exchange Note for a new promissory note in the original principal amount of $81,631.88 (the “Second Exchange Note”), which balance includes an exchange fee of $2,500. The Second Exchange Note was issued in substitution of and not in satisfaction of the First Exchange Note.
The Exchange Agreement and related Second Exchange Note restructure the payment provisions of the First Exchange Note. The Second Exchange Note provides that the Company is to make to Iliad a payment equal to the remaining aggregate outstanding balance of the Second Exchange Note on or before July 15, 2017, which payment must be made in cash. Interest accrues on the outstanding balance of the Second Exchange Note at a rate of 10% per annum; provided, however that if the Company fails to repay the Second Exchange Note when due, or if the Company is otherwise in default under the Second Exchange Note, at the option of Iliad a default interest rate of 18% per annum will apply. In the event the Company is in default under the Second Exchange Note, Iliad also has the option to accelerate the note with the outstanding balance becoming immediately due and payable at an amount equal to 115% of the outstanding balance of the Second Exchange Note as of the date the event of default occurred. The Second Exchange Note may be prepaid without penalty at any time.
The Second Exchange Note provides that, until the Second Exchange Note has been paid in full, Iliad may convert all or part of the outstanding note balance (the “Conversion Amount”) into shares of common stock of the Company at the Conversion Price (as defined below). Notwithstanding the foregoing, the Company has the option to pay the Conversion Amount in cash in lieu of delivering shares of its common stock. As used herein, “Conversion Price” means a price per share equal to 70% of the average of the three lowest closing bid prices of the Company’s common stock in the twenty trading days immediately preceding the applicable conversion. The Second Exchange Note provides that the Company may not issue shares to Iliad under the Second Exchange Note if the issuance of such shares would cause Iliad to beneficially own more than 9.99% of the Company’s outstanding common stock.
The foregoing summaries of the Exchange Agreement and Second Exchange Note do not purport to be complete and are qualified in their entirety by references to the full text of such agreements, which are attached as Exhibits 10.1 and 10.2 hereto, respectively.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement.
The information Set forth under Item 1.01, “Entry into a Material Definitive Agreement,” regarding the Exchange Agreement and related Second Exchange Note is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
Pursuant to the Exchange Agreement and the Second Exchange Note, the Company may be required to issue an unknown number of shares of its common stock in accordance with the terms of the Second Exchange Note. In the event the Company issues shares of its common stock, the Company intends to issue such shares in reliance upon the exemption from registration provided by Rule 144 of the Securities Act of 1933, as amended.
2
Item 9.01
Financial Statements and Exhibits
(d)
Exhibits.
The following exhibits are filed herewith:
Exhibit Number | Description of Exhibit | |
10.1 | Exchange Agreement entered into on July 15, 2016 by and between Vapor Hub International Inc. and Iliad Research and Trading, L.P. | |
10.2 | Form of Convertible Promissory Note issued by Vapor Hub International Inc. on August 12, 2016 in favor of Iliad Research and Trading, L.P. | |
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.
|
| VAPOR HUB INTERNATIONAL INC. | |
|
|
|
|
|
|
|
|
Date: | July 21, 2016 | By: | /s/ Lori Winther |
|
|
| Lori Winther |
|
| Chief Financial Officer | |
4
THE EXCHANGE CONTEMPLATED HEREIN IS INTENDED TO COMPORT WITH THE REQUIREMENTS OF SECTION 3(a)(9) OF THE SECURITIES ACT OF 1933, AS AMENDED.
Exchange Agreement
THIS EXCHANGE AGREEMENT (this “Agreement”) is executed as of July 15, 2016 by and between Vapor Hub International Inc., a Nevada corporation (the “Company”), and Iliad Research and Trading, L.P., a Utah limited partnership, its successors and/or assigns (“Holder”). Capitalized terms not defined herein shall have the same meaning as set forth in the Original Note (as defined below).
A.
Pursuant to that certain Note Purchase Agreement dated August 12, 2015 between Holder and the Company (the “Purchase Agreement”), the Company issued to Holder a certain Promissory Note in the original principal amount of $245,000.00 and having an original issue date of August 12, 2015 (the “Original Note”).
B.
On May 12, 2016, Holder and Company exchanged the Original Note for a new Promissory Note in the original principal amount $272,250.00 and having an original issue date of August 12, 2015 (the “First Exchange Note”).
Subject to the terms of this Agreement, Holder and the Company desire to exchange (such exchange is referred to as the “Note Exchange”) the First Exchange Note for a new Promissory Note in the original principal amount of $81,631.88 and substantially in the form attached hereto as Exhibit A (the “Second Exchange Note”). The Note Exchange will consist of Holder surrendering the First Exchange Note in return for the Second Exchange Note. Other than the surrender of the First Exchange Note, no consideration of any kind whatsoever shall be given by Holder to the Company in connection with this Agreement.
C.
Pursuant to the terms and conditions hereof, Holder and the Company agree to exchange the First Exchange Note for the Second Exchange Note.
NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the parties hereto agree as follows:
1.
Issuance of Second Exchange Note. Upon execution of this Agreement, Holder will surrender the First Exchange Note to the Company and the Company will issue to Holder the Second Exchange Note. In conjunction therewith, the Company hereby confirms that the First Exchange Note represents the Company’s unconditional obligation to pay the outstanding balance of such note pursuant to the terms of the First Exchange Note. The Company and Holder agree that upon surrender, the First Exchange Note will be cancelled and the remaining amount owed to Holder in consideration of the Note Exchange shall hereafter be evidenced solely by the Second Exchange Note.
2.
Exchange Fee; Affirmation of Outstanding Balance. The Company acknowledges that the Outstanding Balance (as defined in the Second Exchange Note) of the Second Exchange Note includes an exchange fee in the amount of $2,500.00 (the “Exchange Fee”), which sum was added to the Outstanding Balance of the Second Exchange Note in consideration of the accommodations granted to the Company and the legal and other fees incurred by Holder in connection with the Note Exchange. Holder and the Company acknowledge and agree that the Outstanding Balance of the Second Exchange Note upon its issuance, including the application of the Exchange Fee, is $81,631.88.
3.
Closing Date; Deliveries. The closing of the transaction contemplated hereby (the “Closing”) along with the delivery of the First Exchange Note and the other Exchange Documents (as defined below) shall occur on the date that is mutually agreed to by the Company and Holder (the “Closing Date”) by means of the exchange by express courier and email of .pdf documents, but shall be deemed to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah. On the Closing Date, prior to or contemporaneously with the execution and delivery of this Agreement, the following events shall occur:
3.1.
The Company shall execute and deliver to Holder the Secretary’s Certificate substantially in the form attached hereto as Exhibit B (the “Secretary’s Certificate”).
3.2.
The Company shall issue the Second Exchange Note to Holder.
3.3.
Mutual delivery of all other Exchange Documents, including without limitation this Agreement.
3.4.
Holder shall deliver the First Exchange Note to the Company for cancellation.
3.5.
Company shall have delivered to Holder a fully executed Irrevocable Letter of Instructions to Transfer Agent substantially in the form attached hereto as Exhibit C (the “TA Letter”) acknowledged and agreed to in writing by Company’s transfer agent (the “Transfer Agent”).
3.6.
Company shall have delivered to Holder a fully executed Share Issuance Resolution to be delivered to the Transfer Agent substantially in the form attached hereto as Exhibit D.
4.
Holding Period, Tacking and Legal Opinion. The Company represents, warrants and agrees that for the purposes of Rule 144 (“Rule 144”) of the Securities Act of 1933, as amended (the “Securities Act”), the holding period of the Second Exchange Note will include the holding period of the Original Note and the First Exchange Note from August 12, 2015, which date is the date that the Original Note was issued. The Company agrees not to take a position contrary to this Section 4 in any document, statement, setting, or situation and further acknowledges that the First Exchange Note has not been amended or altered since such date. The Company represents that it has ceased to be an issuer described in Rule 144(i)(1)(i). The Second Exchange Note is being issued in substitution of and exchange for and not in satisfaction of the First Exchange Note. The Second Exchange Note shall not constitute a novation or satisfaction and accord of the First Exchange Note. The Company acknowledges and understands that the representations and agreements of the Company in this Section 4 are a material inducement to Holder’s decision to consummate the transactions contemplated herein.
5.
Representations, Warranties and Covenants of Holder. Holder represents, warrants, and covenants to the Company that:
5.1.
Investment Purpose. Holder is acquiring the Second Exchange Note for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, Holder reserves the right to dispose of any Conversion Shares (as defined in the Second Exchange Note) (together with the Second Exchange Note, the “Securities”) issued thereunder at any time in accordance with or pursuant to an effective registration statement covering such Conversion Shares or an available exemption under the Securities Act.
5.2.
Accredited Investor Status. Holder is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
2
5.3.
Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of Holder and is a valid and binding agreement of Holder enforceable in accordance with its terms.
5.4.
Brokers. There are no brokerage commissions, finder’s fees or similar fees or commissions payable by Holder in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Holder or any action taken by Holder.
6.
Representations, Warranties, and Covenants of the Company. The Company hereby makes the representations set forth below and covenants and agrees as follows to Holder (in addition to those set forth elsewhere herein):
6.1.
Organization and Qualification. The Company has been duly organized, validly exists and is in good standing under the laws of the State of Nevada. The Company has full corporate power and authority to enter into this Agreement and this Agreement has been duly and validly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement may be limited by the United States Bankruptcy Code and laws effecting creditors’ rights, generally.
6.2.
Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Second Exchange Note, and each of the other Exchange Documents and to issue the Securities in accordance with the terms hereof, (ii) the execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby, including, without limitation, the issuance of the Securities, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) the Exchange Documents have been duly executed and delivered by the Company, (iv) the Exchange Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with its terms, except as such enforcement may be limited by the United States Bankruptcy Code and laws effecting creditors’ rights, generally, and (v) the Company’s signatory has full corporate or other requisite authority to execute the Exchange Documents and to bind the Company. The Company’s Board of Directors has duly adopted a resolution authorizing this Agreement and ratifying its terms, as indicated by the Secretary’s Certificate.
6.3.
Issuance of Securities. The issuance of the Securities is duly authorized and the Securities are and will be, upon issuance, free and clear of all taxes, liens, claims, pledges, mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description other than liens in favor of Holder, and when issued will be validly issued, fully paid and non-assessable.
6.4.
No Conflicts. The execution and delivery by the Company of, and the performance by the Company of its obligations under this Agreement in accordance with the terms of this Agreement will not contravene any provision of applicable law or the charter documents of the Company or any agreement or other instrument binding upon the Company, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement in accordance with the terms of this Agreement.
6.5.
SEC Documents: Financial Statements. None of the Company’s filings (“SEC Documents”) filed with the SEC contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements
3
made therein, in light of the circumstances under which they were made, not misleading. Since August 12, 2015, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
6.6.
Brokers. The Company has taken no action which would give rise to any claim by any person for a brokerage commission, placement agent or finder’s fees or similar payments by Holder relating to this Agreement or the transactions contemplated hereby. The Company shall indemnify and hold harmless each of Holder, its employees, officers, directors, stockholders, managers, members, agents, attorneys, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed or existing fees.
6.7.
Authorization and Issuance. The First Exchange Note and the Original Note were authorized by all necessary company action and validly issued and executed, and the Company’s signatory had full corporate or other requisite authority to execute such agreements and to bind the Company.
6.8.
Holding Period. After due inquiry, the Company represents and warrants that at all times, the Company has complied in all material respects with all applicable securities and other applicable laws in relation with the issuance, holding and transfers of the Original Note and the First Exchange Note. To the Company’s knowledge, no violation of securities and other applicable laws occurred in connection with the acquisition, issuance, or holding of the Original Note and the First Exchange Note.
6.9.
No Modifications. No written document, agreement, instrument, contract, amendment or modification to the First Exchange Note exists that supplements, modifies, or amends the terms set forth in the First Exchange Note.
6.10.
Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would have a material adverse effect on the Company or its operations.
6.11.
No Additional Consideration. The Company has not received any cash or property consideration in any form whatsoever for entering into this Agreement, other than the surrender of the First Exchange Note.
6.12.
Recitals. All of the information, facts and representations set forth in the Recitals section of this Agreement are in all respects true and accurate as of the date hereof and are incorporated as representations and warranties of the Company as if set forth in this Section 6.
6.13.
Issuer Status. Until the full repayment of the Second Exchange Note, the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination.
6.14.
Acknowledgement of Obligations. The Company hereby acknowledges, confirms and agrees that the obligations of the Company to Holder under the Second Exchange Note are unconditionally owed by the Company to Holder without offset, defense or counterclaim of any kind, nature or description whatsoever.
4
6.15.
Termination. The Purchase Agreement and all other Transaction Documents (as defined in the Purchase Agreement) are hereby terminated with respect to the First Exchange Note, but remain in full force and effect with respect to the Second Exchange Note. All references in the Transaction Documents to the First Exchange Note shall hereafter be deemed to be references to the Second Exchange Note.
7.
Deliverables; Exchange Documents. Together with its execution of this Agreement, the Company shall execute and deliver the Secretary’s Certificate, the TA Letter and the Share Issuance Resolution. This Agreement, the Secretary’s Certificate, the Second Exchange Note, the TA Letter, the Share Issuance Resolution and any other documents, agreements, or instruments entered into or delivered in connection with this Agreement, or any amendments to any of the foregoing, are collectively referred to as the “Exchange Documents”. For the avoidance of doubt, all of the Transaction Documents entered into by the parties in connection with the Purchase Agreement (other than the First Exchange Note) shall continue to apply to the Second Exchange Note as if the Second Exchange Note was issued concurrently therewith.
8.
Reservation of Shares. At all times during which the Second Exchange Note is outstanding, Company will reserve from its authorized and unissued Common Stock to provide for the issuance of Common Stock upon the full conversion of the Second Exchange Note at least (i) three (3) times the number of shares of Common Stock obtained by dividing the Outstanding Balance by the Conversion Price (as defined in the Second Exchange Note) (the “Share Reserve”), but in any event not less than 100,000,000 shares of Common Stock shall be reserved at all times for such purpose (the “Transfer Agent Reserve”). Company further agrees that it will cause the Transfer Agent to immediately add shares of Common Stock to the Transfer Agent Reserve in increments of 10,000,000 shares as and when requested by Holder in writing from time to time, provided that such incremental increases do not cause the Transfer Agent Reserve to exceed the Share Reserve. In furtherance thereof, from and after the date hereof and until such time that the Second Exchange Note has been paid in full, Company shall require the Transfer Agent to reserve for the purpose of issuance of Conversion Shares under the Second Exchange Note, a number of shares of Common Stock equal to the Transfer Agent Reserve. Company shall further require the Transfer Agent to hold such shares of Common Stock exclusively for the benefit of Holder and to issue such shares to Holder promptly upon Holder’s delivery of a conversion notice under the Second Exchange Note. Finally, Company shall require the Transfer Agent to issue shares of Common Stock pursuant to the Second Exchange Note to Holder out of its authorized and unissued shares, and not the Transfer Agent Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Transfer Agent Reserve. The Transfer Agent shall only issue shares out of the Transfer Agent Reserve to the extent there are no other authorized shares available for issuance and then only with Holder’s written consent.
9.
Releases and Waivers.
9.1.
Upon the full repayment of the Second Exchange Note (referred to as “Payment in Full”), Holder will release and forever discharge the Company of and from any and all manner of actions, suits, debts, sums of money, contracts, agreements, claims and demands at law or in equity, that Holder had, or may have arising from the First Exchange Note.
9.2.
The Company hereby affirms that the obligations under the Second Exchange Note and as set forth herein are valid and binding obligations of the Company, and hereby waives, to the fullest extent allowable under law, any and all defenses that may be available to a debtor under applicable state and federal law including, without limiting the foregoing, any and all defenses available to a debtor or maker under the provisions of the Uniform Commercial Code pertaining to negotiable instruments.
5
9.3.
Upon execution of this Agreement, the Company releases and forever discharges Holder of and from any and all manner of actions, suits, debts, sums of money, contracts, agreements, claims and demands at law or in equity, that the Company had, or may have arising from the First Exchange Note.
10.
Miscellaneous. The provisions set forth in this Section 10 shall apply to this Agreement, as well as all other Exchange Documents as if these terms were fully set forth therein.
10.1.
Governing Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah without regard to the principles of conflict of laws. Each party consents to and expressly agrees that the exclusive venue for arbitration of any dispute arising out of or relating to this Agreement or the relationship of the parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the parties’ obligations to resolve disputes hereunder pursuant to the Arbitration Provisions (as defined in the Purchase Agreement), each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in Salt Lake County, Utah in any proceeding arising out of or relating to this Agreement and agrees that all Claims (as defined in the Arbitration Provisions) in respect of the proceeding may only be heard and determined in any such court and hereby expressly submits to the exclusive personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth in the Purchase Agreement, such service to become effective ten (10) days after such mailing.
10.2.
Arbitration of Claims. Each party agrees that any dispute arising out of or relating to this Agreement or any other Exchange Document shall be subject to the Arbitration Provisions.
10.3.
Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Except as otherwise expressly provided herein, no person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement.
10.4.
Pronouns. All pronouns and any variations thereof in this Agreement refer to the masculine, feminine or neuter, singular or plural, as the context may permit or require.
10.5.
Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Agreement (or its signature page thereof) will be deemed to be an executed original thereof.
10.6.
Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.
10.7.
Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.
6
10.8.
Entire Agreement. This Agreement, together with the Second Exchange Note, the other Exchange Documents, and the Transaction Documents, constitutes and contains the entire agreement between the parties hereto, and supersedes all prior oral or written agreements and understandings between Holder, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor Holder makes any representation, warranty, covenant or undertaking with respect to such matters.
10.9.
No Reliance. The Company acknowledges and agrees that neither Holder nor any of its officers, directors, members, managers, representatives or agents has made any representations or warranties to the Company or any of its officers, directors, stockholders, agents, representatives, or employees except as expressly set forth in the Exchange Documents and, in making its decision to enter into the transactions contemplated by the Exchange Documents, the Company is not relying on any representation, warranty, covenant or promise of Holder or its officers, directors, members, managers, agents or representatives other than as set forth in the Exchange Documents.
10.10.
Amendment. Any amendment, supplement or modification of or to any provision of this Agreement, shall be effective only if it is made or given by an instrument in writing (excluding any email message) and signed by the Company and Holder.
10.11.
No Waiver. No forbearance, failure or delay on the part of a party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver of any provision of this Agreement shall be effective (a) only if it is made or given in writing (including an email message) and (b) only in the specific instance and for the specific purpose for which made or given.
10.12.
Assignment. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of Holder, which consent may be withheld at the sole discretion of Holder; provided, however, that in the case of a merger, sale of substantially all of the Company’s assets or other corporate reorganization, Holder shall not unreasonably withhold, condition or delay such consent. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, including its financing sources, in whole or in part.
10.13.
Advice of Counsel. In connection with the preparation of this Agreement and all other Exchange Documents, each of the Company, its stockholders, officers, agents, and representatives acknowledges and agrees that the attorney that prepared this Agreement and all of the other Exchange Documents acted as legal counsel to Holder only. Each of the Company, its stockholders, officers, agents, and representatives (a) hereby acknowledges that he/she/it has been, and hereby is, advised to seek legal counsel and to review this Agreement and all of the other Exchange Documents with legal counsel of his/her/its choice, and (b) either has sought such legal counsel or hereby waives the right to do so.
10.14.
No Strict Construction. The language used in this Agreement is the language chosen mutually by the parties hereto and no doctrine of construction shall be applied for or against any party.
10.15.
Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Exchange Documents, the parties agree that the
7
party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.
10.16.
Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER EXCHANGE DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.
10.17.
Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
10.18.
Notices. Unless otherwise specifically provided for herein, all notices, demands or requests required or permitted under this Agreement to be given to the Company or Holder shall be given as set forth in the “Notices” section of the Purchase Agreement.
10.19.
Survival of Representations and Warranties. All of the representations and warranties made herein shall survive the execution and delivery of this Agreement for the maximum time allowable by applicable law.
10.20.
Transaction Fees. Each party shall be responsible for its own attorneys’ fees and other costs and expenses associated with documenting and closing the transaction contemplated by this Agreement.
10.21.
Specific Performance. The Company and Holder acknowledge and agree that irreparable damage would occur in the event that any provision of this Agreement or any of the other Exchange Documents were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions, without (except as specified in the Arbitration Provisions) the necessity to post a bond, to prevent or cure breaches of the provisions of this Agreement or such other Exchange Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.
10.22.
Time is of the Essence. Time is expressly made of the essence of each and every provision of this Agreement and the Exchange Documents.
10.23.
Voluntary Agreement. The Company has carefully read this Agreement and each of the other Exchange Documents and has asked any questions needed for the Company to understand the terms, consequences and binding effect of this Agreement and each of the other Exchange Documents and
8
fully understand them. The Company has had the opportunity to seek the advice of an attorney of the Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Exchange Documents voluntarily and without any duress or undue influence by Holder or anyone else.
[Remainder of the page intentionally left blank; signature page to follow]
9
IN WITNESS WHEREOF, each of the undersigned represents that the foregoing statements made by it above are true and correct and that it has caused this Exchange Agreement to be duly executed on its behalf (if an entity, by one of its officers thereunto duly authorized) as of the date first above written.
HOLDER:
ILIAD RESEARCH AND TRADING, L.P.
By: Iliad Management, LLC, its General Partner
By: Fife Trading, Inc., its Manager
By: /s/ John M. Fife
John M. Fife, President
COMPANY:
VAPOR HUB INTERNATIONAL INC.
By:
/s/ Lori Winther
Name:
Lori Winther
Title:
Chief Financial Officer
ATTACHMENTS:
Exhibit A
Second Exchange Note
Exhibit B
Secretary’s Certificate
Exhibit C
TA Letter
Exhibit D
Share Issuance Resolution
[Signature Page to Exchange Agreement]
THIS NOTE (AS DEFINED BELOW) IS ISSUED IN EXCHANGE FOR (WITHOUT ANY ADDITIONAL CONSIDERATION) THE FIRST EXCHANGE NOTE (AS DEFINED BELOW). FOR PURPOSES OF RULE 144, THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON AUGUST 12, 2015.
CONVERTIBLE PROMISSORY NOTE
U.S. $81,631.88
“Original Issue Date”: August 12, 2015
FOR VALUE RECEIVED, VAPOR HUB INTERNATIONAL INC., a Nevada corporation (“Borrower”), promises to pay in lawful money of the United States of America to the order of ILIAD RESEARCH AND TRADING, L.P., a Utah limited partnership, or its successors or assigns (“Lender”), the principal sum of $81,631.88, together with all other amounts due under this Convertible Promissory Note (this “Note”). This Note is issued pursuant to that certain Exchange Agreement with an effective date of July 15, 2016 (the “Exchange Date”), as the same may be amended from time to time (the “Exchange Agreement”), by and between Borrower and Lender, pursuant to which Lender exchanged the First Exchange Note (as defined in the Exchange Agreement) for this Note, pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.
1.
TRANSACTION DOCUMENTS. Borrower and Lender agree that the terms and provisions of the Purchase Agreement (as defined in the Exchange Agreement) and the other Transaction Documents (as defined in the Purchase Agreement) shall be deemed to apply in all respects to this Note. All references in the Purchase Agreement and the other Transaction Documents to the term “Note” shall be deemed to mean and refer to this Note and not the Original Note (as defined in the Exchange Agreement) or the First Exchange Note. Capitalized terms not defined herein shall have the same meaning as set forth in the Exchange Agreement.
2.
PAYMENT. Borrower shall pay to Lender the entire remaining outstanding balance of this Note (the “Outstanding Balance”) in cash on or before July 15, 2017 (the “Maturity Date”). Borrower will make all payments of sums due hereunder to Lender at Lender’s address set forth in the Purchase Agreement, or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs and late charges, then to accrued interest and finally to principal.
3.
INTEREST. Interest shall accrue on the Outstanding Balance of this Note at the rate of ten percent (10%) per annum from the Exchange Date until the same is paid in full; provided, however, that upon the occurrence of an Event of Default (as defined below), the Outstanding Balance of this Note shall, upon written notice from Lender to Borrower, bear interest at the lesser of the rate of eighteen percent (18%) per annum or the maximum rate permitted by applicable law, and calculated on the basis of a 360-day year, from the date the applicable Event of Default occurred until paid.
4.
EXCHANGE FEE; ORIGINAL ISSUE DISCOUNT; TRANSACTION EXPENSES. As set forth in the Exchange Agreement, Borrower agreed to pay an Exchange Fee (as defined in the Exchange Agreement) in the amount of $2,500.00, which Exchange Fee is included in the principal balance of this Note and is fully earned as of the Exchange Date. In addition, in connection with the Original Note, Borrower agreed to pay $40,000.00 as an original issue discount and $5,000.00 to Lender to cover Lender’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Original Note, all of which amounts were included in the initial principal balance of the Original Note and are included in the initial principal balance of this Note, and all of which amounts are fully earned and payable as of the date hereof. Last, in connection with the First Exchange Note, Borrower agreed to pay an exchange fee in the amount of $24,750.00 to Lender, which amount was included in the initial principal balance of the First Exchange
Note and is included in the initial principal balance of this Note, and which amount is fully earned and payable as of the date hereof.
5.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amounts owed earlier than they are due. Early payments of less than all principal, fees and interest outstanding will not, unless agreed to by Lender in writing, relieve Borrower of any of Borrower’s obligations hereunder.
6.
6.1.
Conversion Price. Subject to the adjustments set forth herein, the conversion price (the “Conversion Price”) for each Conversion (as defined below) shall be equal to 70% (the “Conversion Factor”) multiplied by the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable Conversion.
6.2.
Conversions. Lender has the right at any time until the Outstanding Balance has been paid in full, at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any part of the Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price. Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be effectively delivered to Borrower by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 6.4 below.
6.3.
Cash Payment Option. Upon receipt of a Conversion Notice, Borrower shall have the option, but not the obligation, to pay the applicable Conversion Amount in cash in lieu of delivering the Conversion Shares set forth in the applicable Conversion Notice (the “Cash Payment Option”). Borrower may exercise the Cash Payment Option by delivering the applicable Conversion Amount via wire transfer of immediately available funds to the account designated by Lender within two (2) business days of Borrower’s receipt of the Conversion Notice. In the event Borrower does not deliver the applicable Conversion Amount within such two (2) business day period, Borrower will be deemed to have elected not to exercise its Cash Payment Option and shall be obligated to deliver the applicable Conversion Shares in accordance with Section 6.4 below.
6.4.
Method of Conversion Share Delivery. In the event Borrower elects not to exercise its Cash Payment Option, on or before the close of business on the third (3rd) Trading Day following the delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible (as defined below) at such time, deliver or cause its transfer agent to deliver the Conversion Shares electronically via DWAC (as defined below) to the account designated by Lender in the Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the Conversion Shares no later than the close of business on the Delivery Date pursuant to the terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the event Borrower or its transfer agent refuses to deliver the Conversion Shares to Lender on grounds that such issuance is in violation of Rule 144, Borrower shall deliver or cause its transfer agent to deliver the Conversion Shares to Lender with a restricted securities legend, but otherwise in accordance with the provisions of this Section 6.3. In conjunction therewith, Borrower will also deliver to Lender a written opinion from its
2
counsel or its transfer agent’s counsel opining as to why the issuance of the Conversion Shares violates Rule 144.
6.5.
Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, if at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 9.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower must not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are referred to herein as the “Ownership Limitation Shares”. Borrower will reserve the Ownership Limitation Shares for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the number of the Ownership Limitation Shares. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.
6.6.
Certain Definitions. Certain terms used in this Section 6 are defined as follows:
(a)
“Bloomberg” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by Lender and reasonably satisfactory to Borrower).
(b)
“Closing Bid Price” and “Closing Trade Price” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto.
(c)
“DTC” means the Depository Trust Company or any successor thereto.
(d)
“DTC/FAST Program” means DTC’s Fast Automated Securities Transfer program.
(e)
“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.
(f)
“DWAC Eligible” means that (i) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system, (ii) Borrower has been approved (without revocation) by DTC’s
3
underwriting department, (iii) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program, (iv) the Conversion Shares are otherwise eligible for delivery via DWAC; (v) Borrower has previously delivered all Conversion Shares to Lender via DWAC; and (vi) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.
(g)
“Free Trading” means that (i) the Conversion Shares have been cleared and approved for public resale by the compliance departments of Lender’s brokerage firm and the clearing firm servicing such brokerage, and (ii) such Conversion Shares are held in the name of the clearing firm servicing Lender’s brokerage firm and have been deposited into such clearing firm’s account for the benefit of Lender.
(h)
“Trading Day” means any day on which the New York Stock Exchange is open for trading.
7.
EVENT OF DEFAULT. The occurrence and continuance of any of the following shall constitute an “Event of Default” under this Note:
7.1.
Failure to Pay. Borrower shall fail to pay when due, whether at stated maturity, upon acceleration or otherwise, any principal or interest payment, or any other payment required under the terms of this Note on the date due.
7.2.
Failure to Deliver Conversion Shares. Borrower shall fail to deliver any Conversion Shares to Lender in accordance with the terms hereof.
7.3.
Breaches of Covenants. Borrower or any other person or entity fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note, in the Purchase Agreement, in the Exchange Agreement, any other Transaction Document, or in any other agreement securing payment of this Note and such failure to comply or perform when due is not cured within three (3) days of the initial occurrence of such failure to comply or perform when due.
7.4.
Representations and Warranties. Any representation or warranty made by Borrower to Lender in this Note, the Purchase Agreement, the Exchange Agreement, any other Transaction Document, or any related agreement shall be materially false, incorrect, incomplete or misleading in any material respect when made or furnished.
7.5.
Voluntary Bankruptcy or Insolvency Proceedings. Borrower shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, or (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it.
7.6.
Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator, or custodian of Borrower or of all or a substantial part of its property, or an involuntary case or other proceedings seeking liquidation, reorganization, or other relief with respect to Borrower or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement.
4
7.7.
Government Action. If any governmental or regulatory authority takes or institutes any action that will materially affect Borrower’s financial condition, operations or ability to pay or perform Borrower’s obligations under this Note.
7.8.
Judgment. A judgment or judgments for the payment of money in excess of the sum of $100,000.00 in the aggregate shall be rendered against Borrower and either (i) the judgment creditor executes on such judgment or (ii) such judgment remains unpaid or undischarged for more than sixty (60) days from the date of entry thereof or such longer period during which execution of such judgment shall be stayed during an appeal from such judgment.
7.9.
Attachment. Any execution or attachment shall be issued whereby any substantial part of the property of Borrower shall be taken or attempted to be taken and the same shall not have been vacated or stayed within thirty (30) days after the issuance thereof.
7.10.
Failure to Make Required Filings. Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the United States Securities and Exchange Commission.
7.11.
Trading Suspension. Trading in Borrower’s Common Stock shall be suspended, halted, frozen, chilled, reach zero bid or shall otherwise cease trading on Borrower’s principal trading market.
7.12.
Cross Default. Borrower breaches or any event of default occurs under any term or provision of any Other Agreement (as defined hereafter), which breach or default, if capable of being cured, is not cured within ten (10) days following delivery of written notice of such breach or default by Lender to Borrower. For purposes hereof, “Other Agreement” means collectively, (i) all existing and future agreements and instruments between, among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (ii) any financing agreement or a material agreement that affects Borrower’s ongoing business operations, excluding in both cases the Transaction Documents.
7.13.
Share Reserve. Borrower shall fail to maintain the Share Reserve as required by the Exchange Agreement.
8.
ACCELERATION; REMEDIES.
8.1.
At any time following the occurrence of an Event of Default (other than an Event of Default referred to in Sections 7.5 and 7.6), Lender may, by written notice to Borrower, declare all unpaid principal, plus all accrued interest and other amounts due hereunder to be immediately due and payable at the Mandatory Default Amount (as defined below) without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Sections 7.5 and 7.6, immediately and without notice, all outstanding unpaid principal, plus all accrued interest and other amounts due hereunder shall automatically become immediately due and payable at the Mandatory Default Amount, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Lender may exercise any other right, power or remedy permitted to it by law, either by suit in equity or by action at law, or both. For purposes hereof, the term “Mandatory Default Amount” means an amount equal to 115% of the Outstanding Balance of this Note as of the date the Event of Default occurred, plus all interest, fees, and charges that may accrue on such Outstanding Balance thereafter.
8.2.
Upon the occurrence of a Change in Control (as defined below), and without further notice to Borrower, all unpaid principal, plus all accrued interest and other amounts due
5
hereunder, shall become immediately due and payable. For purposes hereof, a “Change in Control” means a sale of all or substantially all of a Borrower’s assets, or a merger, consolidation, significant equity financing, or other capital reorganization of Borrower with or into another company; provided however that a merger, consolidation, significant equity financing, or other capital reorganization in which the holders of more than fifty percent (50%) of the equity of Borrower outstanding immediately prior to such transaction continue to hold (either by the voting securities remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of such Borrower, or such surviving entity, outstanding immediately after such transaction shall not constitute a Change in Control.
9.
UNCONDITIONAL OBLIGATION; NO OFFSET. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make all payments due hereunder in accordance with the terms of this Note.
10.
NO USURY. Notwithstanding any other provision contained in this Note or in any instrument given to evidence the obligations evidenced hereby: (a) the rates of interest and charges provided for herein and therein shall in no event exceed the rates and charges which result in interest being charged at a rate equaling the maximum allowed by law; and (b) if, for any reason whatsoever, Lender ever receives as interest in connection with the transaction of which this Note is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder and not toward payment of interest.
11.
ATTORNEYS’ FEES. If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement or action including, without limitation, reasonable attorneys’ fees and disbursements.
12.
GOVERNING LAW; VENUE. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.
13.
ARBITRATION OF DISPUTES. Borrower agrees that any dispute arising under this Note shall be subject to the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.
14.
WAIVERS. Borrower hereby waives presentment, notice of nonpayment, notice of dishonor, protest, demand and diligence.
15.
LOSS OR MUTILATION. On receipt by Borrower of evidence reasonably satisfactory to Borrower of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction of this Note, on delivery of an indemnity agreement reasonably satisfactory in form and amount to Borrower or, in the case of any such mutilation, on surrender and cancellation of such Note, Borrower at its expense will execute and deliver, in lieu thereof, a new Note of like tenor.
6
16.
NOTICES. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by this reference.
17.
AMENDMENT AND WAIVER. This Note and its terms and conditions may be amended, waived or modified only in writing by Borrower and Lender.
18.
SEVERABILITY. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Note shall remain in full force and effect.
19.
ASSIGNMENTS. Borrower may not assign this Note without the prior written consent of Lender. This Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.
20.
FINAL NOTE. This Note, together with the Exchange Agreement and the other Transaction Documents, contains the complete understanding and agreement of Borrower and Lender and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations. THIS NOTE, TOGETHER WITH THE EXCHANGE AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
21.
WAIVER OF JURY TRIAL. BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, BORROWER ACKNOWLEDGES THAT IT KNOWINGLY AND VOLUNTARILY IS WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
22.
TIME IS OF THE ESSENCE. Time is of the essence of this Note and each and every provision hereof in which time is an element.
23.
LIQUIDATED DAMAGES. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages.
[Remainder of page intentionally left blank]
7
IN WITNESS WHEREOF, Borrower has caused this Note to be issued as of the date first set forth above.
BORROWER:
VAPOR HUB INTERNATIONAL INC.
By:
Name:
Title:
[Signature Page to Convertible Promissory Note]
EXHIBIT A
Iliad Research and Trading, L.P.
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
Vapor Hub International Inc.
Date: __________________
Attn: _________________
1871 Tapo Street
Simi Valley, California 93063
CONVERSION NOTICE
The above-captioned Lender hereby gives notice to Vapor Hub International Inc., a Nevada corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender with an original issue date of August 12, 2015 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
A.
Date of Conversion:
____________
B.
Conversion #:
____________
C.
Conversion Amount:
____________
D.
Conversion Price: _______________
E.
Conversion Shares: _______________ (C divided by D)
F.
Remaining Outstanding Balance of Note: ____________*
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Conversion Notice and such Transaction Documents.
Please transfer the Conversion Shares electronically (via DWAC) to the following account:
Broker:
Address:
DTC#:
Account #:
Account Name:
To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:
_____________________________________
_____________________________________
_____________________________________
[Remainder of page intentionally left blank]
Sincerely,
Lender:
ILIAD RESEARCH AND TRADING, L.P.
By: Iliad Management, LLC, it General Partner
By: Fife Trading, Inc., its Manager
By:
John M. Fife, President