NEITHERTHEISSUANCE ANDSALEOFTHESECURITIES REPRESENTEDBY THIS NOTE NORTHESECURITIES INTO WHICHTHESESECURITIES ARE CONVERTIBLE HAVEBEEN REGISTERED UNDERTHESECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLESTATESECURITIESLAWS.THESECURITIESMAY NOTBE OFFEREDFORSALE,SOLD,TRANSFERRED OR ASSIGNED(I) INTHE ABSENCE OF(A) ANEFFECTIVE REGISTRATIONSTATEMENTFORTHESECURITIES UNDERTHESECURITIES ACT OF 1933,AS AMENDED, OR(B) AN OPINION OF COUNSEL(WHICH COUNSELSHALLBESELECTEDBYTHE HOLDER), IN AGENERALLY ACCEPTABLEFORM,THAT REGISTRATION IS NOT REQUIRED UNDERSAID ACT OR(II) UNLESSSOLDPURSUANTTO RULE 144 OR RULE 144A UNDERSAID ACT. NOTWITHSTANDINGTHEFOREGOING,THESECURITIESMAYBEPLEDGED IN CONNECTION WITH ABONAFIDE MARGIN ACCOUNT OR OTHERLOAN ORFINANCING ARRANGEMENTSECUREDBYTHESECURITIES.
Amount: $250,000
Original Issuance: October 12, 2017
Amended and Restated: November 30, 2017
Second Amendment and Restatement:
January 9, 2018
SecondAmended and Restated SECURED PROMISSORY NOTE
Rocky Mountain High Brands, Inc.,(hereinaftercalled the“Company”), hereby promises to pay to the order ofGHS Investments, LLC,aNevadaLimited Liability Company, or itsregisteredassigns(the“Holder”) the sum of $250,000 by July 12, 2018, (the "Maturity Date") in installments (as outlined below) together withany interestas setforth herein,and to pay interest on the unpaidprincipal balancehereofat therateoftenpercent(10%)(the“InterestRate”) perannumfrom the date hereof(the“Issue Date”) until the same becomes dueandpayable, whetherat maturity or uponacceleration orby prepayment or otherwise.
This Note shall serve in lieu of and replace, that certain Secured Promissory Note issued by the Company to the Holder on October 12, 2017.
This Note may not beprepaid in whole or in partexceptas otherwiseexplicitlysetforth herein. Following any Event of Default, all amounts owing pursuant to this Note shall bear interestat therateofthe lesser of (a)twenty percent(20%) perannum or (b) the
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maximum interested allowed by law, from the due date thereof until the same is paid(“DefaultInterest”).Interest shall becomputed on the basis of a 365-dayyearand theactual number of dayselapsed. All paymentsdue hereunder(to theextent notmade in common stock) shall be made in lawful money of the UnitedStates of America.
The Company shall make the following payments towards the outstanding balance due under this Note:
A. $50,000 on or before April 12, 2018;
B. $50,000 on or before May 12, 2018;
C. $50,000 on or before June 12, 2018; and
D. The balance of all amounts outstanding on July 12, 2018 (each an "Installment").
All payments shall bemadeat suchaddressas the Holder shall hereaftergive to theCompanybywritten noticemade inaccordance with the provisions of this Note.Wheneveranyamountexpressed to be dueby the terms of this Note is due onanyday which is not a business day, the same shall instead be dueon the next succeeding day which is a business dayand, in thecase ofany interest payment datewhich is not the dateon which this Note is paid infull, the extensionof the due date thereof shall not be taken intoaccountfor purposes of determining theamount of interest due on such date. As used in this Note, the term“business day” shall meananyday other than aSaturday,Sunday or a day on whichcommercial banks in thecity ofNew York, New Yorkareauthorized orrequired bylaw orexecutive order toremainclosed. Eachcapitalized term used herein,and not otherwise defined, shall have the meaningascribed thereto in the supporting documents of same date (attached hereto).
This Note isfreefromall taxes, liens,claimsandencumbrances withrespect to the issue thereofand shall not besubject to preemptiverights or other similarrights of shareholders of theCompanyand will not impose personal liability upon the holder thereof.
Thefollowingterms shallapply to this Note:
ARTICLEI.CONVERSIONRIGHTS
1.1 ConversionRight. Following the execution of this Note,the Holder shall have theright toconvertall oranypart ofthe outstandingand unpaid principalamount of this Note intofully paidand non-assessable shares ofCommonStock,as suchCommonStockexists on the Issue Date, orany sharesofcapital stock or other securities of theCompany into which suchCommonStock shall hereafter bechanged orreclassifiedat theconversion price (the“ConversionPrice”) determinedas provided herein(a“Conversion”);provided,however, that in noevent shall the Holder beentitled toconvertany portion of this Note inexcess of that portion of this Note uponconversion of which the sum of(1) the number of shares ofCommonStock beneficiallyownedby the Holderand itsaffiliates(other than shares ofCommonStock which may bedeemedbeneficially owned through the ownershipof theunconverted portion of the Notes or the unexercised or unconverted
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portion ofany other security of theCompany subject to a limitationonconversion orexerciseanalogous to the limitationscontained herein)and(2) the numberofsharesofCommonStock issuable upon theconversion of the portion of this Note withrespect to which the determination of this proviso is being made, wouldresult in beneficial ownershipby the Holderand itsaffiliates of more than 4.99% of the outstanding shares ofCommonStock.For purposesof the proviso to the immediatelypreceding sentence, beneficial ownership shall be determined inaccordance withSection13(d) of theSecurities Exchange Act of 1934,asamended(the“ExchangeAct”),andRegulations 13D-G thereunder. Thenumber of sharesofCommonStock to be issued uponeachconversion of this Note shall be determinedby dividing theConversion Amount(as defined below) by theapplicableConversionPrice then ineffect on the date specified in the notice ofconversion,(the“Notice ofConversion”), delivered to theCompanyby the Holder inaccordance with theSections below; provided that the Notice ofConversion is submittedbyfacsimile ore-mail(orby other meansresulting in, orreasonablyexpected toresult in, notice) to theCompany before 6:00 p.m., New York, New York time on suchconversion date(the“Conversion Date”).
The term“Conversion Amount” means, withrespect toanyconversion of this Note, thesum of(1) theprincipalamount of this Note to beconverted in suchconversionplus(2)at theCompany’s option,accruedand unpaid interest, ifany, on suchprincipalamountat the interestrates provided in this Noteto theConversionDate,plus(3)at theCompany’s option, Default Interest, ifany, on theamountsreferred to in the immediately precedingclauses(1)and/or(2)plus(4)at the Holder’s option,anyamounts owed to the Holder.
1.2 ConversionPrice.
At any time after the execution of this Note, the Holder shall have the right, at its option, to convert all or any portion of this Note into shares of fully paid and non-assessable Common Stock of the Maker at the price of $0.005 per share, (the "Conversion Price").
1.3 AuthorizedShares. TheCompanycovenants that during theperiod theconversion rightexists theCompany willreservefrom itsauthorizedand unissuedCommonStock a sufficient number of shares,freefrom preemptiverights, to providefor the issuance ofCommonStock upon thefullconversion of thisNote.TheCompanyisrequiredatall times tohaveauthorizedandreservedthree times the numberof shares that isactually issuable uponfullconversion of the Note(based on theConversionPrice of the Notes ineffectfrom time to time)(the“Reserved Amount”). TheReserved Amount shall be increasedfrom time to time inaccordance with theCompany’s obligations.
TheCompanyrepresents that upon issuance, such shares will be dulyandvalidly issued,fully paidand non-assessable.Inaddition, if theCompany shall issueany securities or makeanychange to itscapital structure which wouldchange the numberof shares ofCommonStock into which the Notes shall beconvertibleat the thencurrent
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ConversionPrice, theCompany shallat the same time make proper provision so that thereafter there shallbe a sufficient number of shares ofCommonStockauthorizedandreserved,freefrom preemptiverights,forconversion of the outstanding Notes.
TheCompany(i)acknowledgesthat it will irrevocably instruct its transferagent to issuecertificatesfor theCommonStock issuable uponconversion of this Note,and(ii)agrees that its issuance of this Note shallconstitutefullauthority to its officersandagents whoarecharged with the duty ofexecuting stockcertificates toexecuteand issue the necessarycertificatesfor shares ofCommonStock inaccordance with the termsandconditions of this Note.
If,atany time theCompany does not maintain theReserved Amount it will beconsideredan Event ofDefault as defined in this Note.
1.4 Method ofConversion.
(a) MechanicsofConversion. ThisNote may beconvertedby the Holder, in whole or in part,atany timefollowing executionby submitting to theCompany a NoticeofConversion(byfacsimile,e-mail or otherreasonable means ofcommunication dispatched on theConversion Date prior to 6:00 p.m., New York,New York time).
(b) Surrenderof Note UponConversion. Notwithstandinganything to thecontrary setforth herein, uponconversion ofthis Note inaccordance with the terms hereof, the Holder shall not be required to physically surrender this Note to theCompany unless theentire unpaid principalamount of this Note is soconverted. The Holderand theCompany shall maintainrecords showing the principalamount soconvertedand the dates of suchconversions or shall use such other method,reasonably satisfactory to the Holderand theCompany, soas not torequire physical surrender of this Note uponeach suchconversion. In theevent ofany dispute or discrepancy, suchrecords of theHolder shall,prima facie, becontrollingand determinative in theabsence of manifesterror. The Holderandanyassignee,byacceptance of this Note,acknowledgeandagree that,byreason of the provisions of this paragraph,followingconversionof a portion of this Note, the unpaidand unconverted principalamount of this Noterepresentedby this Note maybe less than theamount stated on theface hereof.
c) PaymentofTaxes.TheCompanyshall notberequired topayany tax which maybe payable inrespect ofany transfer involved in the issueand deliveryof shares of Common Stock or other securities or property onconversion of this Note in a name other than that of the Holder(or in street name),and theCompanyshall not berequired to issue or deliverany such sharesor other securities orproperty unlessand until the person or persons(other than the Holder or thecustodian in whose street name such sharesare to be heldfor the Holder’saccount)requesting theissuance thereof shall have paid to theCompanytheamount ofany such tax or shall haveestablished to the satisfaction of theCompanythat such tax has been paid.
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(d) DeliveryofCommonStock uponConversion. Uponreceiptby theCompanyfrom the Holder of afacsimile transmission ore-mail(or otherreasonable means ofcommunication) of a Notice ofConversion meeting therequirementsforconversionas provided in thisSection, theCompany shall issueand deliver orcause to be issuedand delivered to or upon the order of the Holdercertificatesfor theCommonStock issuable upon suchconversion within three(3) business daysafter suchreceipt(the“Deadline”)(and, solely in thecase ofconversionof theentire unpaid principalamount hereof, surrender of this Note) inaccordance with the terms hereofand thePurchase Agreement. The Company will pay any and all legal, deposit and transfer agent fees that may be incurred or charged in connection with the issuance of shares of the Company's Common Stock to the Holder arising out of or relating to the conversions of this Note.
(e) Obligation ofCompany to DeliverCommonStock. Uponreceiptby theCompany of aNotice ofConversion, the Holder shall be deemed to be the holder ofrecord of theCommonStock issuable upon suchconversion, the outstandingprincipalamountand theamount ofaccruedand unpaid interest on this Note shall bereduced toreflect suchconversion,and, unless theCompany defaults on its obligations under this Article I,allrights withrespect to the portion of this Note being soconverted shallforthwith terminateexcept theright toreceive theCommonStock or other securities,cash or otherassets,as herein provided, on suchconversion. If the Holder shall havegiven a NoticeofConversionas provided herein, theCompany’s obligation to issueand deliver thecertificatesforCommonStock shall beabsoluteand unconditional, irrespectiveof theabsence ofanyaction by the Holder toenforce the same,any waiver orconsent withrespect toany provision thereof, therecovery ofany judgmentagainstanypersonoranyaction toenforce thesame,anyfailure or delay in theenforcement ofany other obligation of theCompany to the holder ofrecord, orany setoff,counterclaim,recoupment, limitationor termination, orany breach oralleged breachby the Holder ofany obligation to theCompany,and irrespective ofany othercircumstancewhich might otherwise limit such obligation of theCompany to the Holder inconnection withsuchconversion. TheConversion Date specified in the Notice ofConversion shall be theConversion Date so longas the Notice ofConversion isreceived by theCompany before 6:00 p.m., New York,New York time, on such date.
(f) DeliveryofCommonStockby Electronic Transfer.In lieu of delivering physicalcertificatesrepresenting theCommonStock issuable uponconversion, provided the Company is participating in the DepositoryTrustCompany(“DTC”)Fast AutomatedSecurities Transfer(“FAST”) program, uponrequest of the Holderand itscompliance with the provisionscontained inSection 1.1and in thisSection 1.4, the Company shall use its bestefforts tocause its transferagent toelectronically transmit theCommonStock issuable uponconversion to the Holderbycrediting theaccount of Holder’s Broker with DTC through its DepositWithdrawal AgentCommission(“DWAC”)system.
(g) Failure toDeliverCommonStockPrior to Deadline.Without inany way limiting the Holder’sright to pursue otherremedies, includingactual damagesand/orequitablerelief, the partiesagree that if delivery of theCommonStock issuable uponconversion of this Note is not delivered by the Deadline theCompany shall pay to the
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Holder $2,000 perday incash,foreachday beyondthe Deadline that theCompanyfails to deliver suchCommonStock.Suchcashamount shall be paid to Holderby thefifth dayof the monthfollowing the month in which it hasaccrued or,at the option of the Holder(by written notice to theCompany by thefirst day of the monthfollowing the month in which it hasaccrued), shall beadded to the principalamount of this Note, in whichevent interest shallaccrue thereon inaccordance with the terms of this Noteand suchadditional principalamount shall beconvertible intoCommonStock inaccordance with the terms of this Note. TheCompanyagrees that theright toconvert is a valuableright to the Holder. The damagesresultingfrom afailure,attempt tofrustrate, and interference with suchconversionrightare difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provisioncontained in thisSectionare 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 not caused by the Company, including acts of God, fires, floods, explosions, riots wars, hurricanes, etc.
1.5 Concerning theShares. The shares ofCommonStock issuable uponconversion of this Note may not be soldor transferred unless(i) such sharesare sold pursuant toaneffectiveregistration statement under the Act or(ii) theCompany orits transferagent shall have beenfurnished withan opinion ofcounsel(which opinion shall be inform, substanceand scopecustomaryfor opinions ofcounsel incomparable transactions) to theeffect that the shares to be sold or transferred may be sold or transferred pursuant toanexemptionfrom suchregistration or(iii) such sharesare soldor transferred pursuant toRule144 under the Act(or a successorrule)(“Rule144”) or(iv) such sharesare transferred toan“affiliate”(as defined inRule 144) of theCompany whoagrees to sell orotherwise transfer the shares only inaccordance with thisSection 1.5and who isan Accredited Investor. Exceptas otherwise provided herein(and subject to theremoval provisions setforth below), until such timeas the shares ofCommonStock issuable uponconversionof this Note have beenregistered under the Actor otherwise may be sold pursuant toRule 144 withoutanyrestrictionas to the number of securitiesas of a particular date thatcan then be immediately sold,eachcertificatefor sharesofCommonStock issuable uponconversion of this Note that has not been so included inaneffectiveregistration statement or that has not been sold pursuant toaneffectiveregistration statement oranexemption that permitsremoval of the legend, shall bear a legend substantially in thefollowingform,asappropriate:
“NEITHERTHE ISSUANCEAND SALEOFTHE SECURITIESREPRESENTEDBYTHISCERTIFICATENORTHE SECURITIES INTO WHICHTHESE SECURITIESAREEXERCISABLEHAVEBEENREGISTEREDUNDERTHE SECURITIESACTOF 1933,ASAMENDED,ORAPPLICABLE STATE SECURITIESLAWS.THE SECURITIES MAYNOTBEOFFERED FOR SALE, SOLD,TRANSFERREDORASSIGNED(I)INTHEABSENCEOF(A)ANEFFECTIVEREGISTRATION STATEMENT FORTHE SECURITIESUNDERTHE SECURITIESACTOF 1933,ASAMENDED,OR(B)ANOPINIONOFCOUNSEL(WHICHCOUNSEL SHALLBE SELECTEDBY
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THEHOLDER), IN AGENERALLYACCEPTABLE FORM,THATREGISTRATION ISNOTREQUIREDUNDER SAIDACTOR(II)UNLESS SOLDPURSUANTTORULE 144ORRULE 144AUNDER SAIDACT.NOTWITHSTANDINGTHE FOREGOING,THE SECURITIES MAYBEPLEDGED INCONNECTIONWITH ABONAFIDE MARGINACCOUNTOROTHERLOANOR FINANCINGARRANGEMENT SECUREDBYTHE SECURITIES.”
The legend setforthabove shall beremovedand theCompany shall issue to the Holder a newcertificate thereforefree ofanytransferlegendif(i) theCompany or its transferagent shall havereceivedan opinion ofcounsel, inform, substanceand scopecustomaryfor opinions ofcounsel incomparable transactions, to theeffect that a publicsale or transferof suchCommonStock may be made withoutregistration under the Act, whichopinion shall beacceptedby theCompany so that the sale or transfer iseffected or(ii) in thecase of theCommonStock issuable uponconversion of this Note, such security isregisteredfor saleby the Holder underaneffectiveregistration statementfiled under theAct or otherwise maybe sold pursuant toRule 144 withoutanyrestrictionas to the number ofsecuritiesas of aparticular date thatcan then be immediately sold. In theevent that theCompany does not accept the opinion ofcounsel providedby theBuyer withrespect to the transfer ofSecurities pursuant toanexemptionfromregistration, suchasRule 144 orRegulationS,atthe Deadline, it will beconsideredan Eventof Default pursuant tothis note.
1.6 EffectofCertain Events.
(a)Effect ofMerger,Consolidation, Etc. At the option of the Holder, the sale,conveyance or disposition ofall or substantiallyall of theassets of theCompany, theeffectuation by theCompany of a transaction orseries ofrelated transactions in which more than50% of the voting power of theCompany is disposed of,or theconsolidation, merger or other businesscombination of theCompany with or intoany otherPerson(as defined below) orPersons when theCompany is not the survivor shalleither:(i) be deemed to bean Event of Default(as defined in Article III) pursuant to which theCompany shall berequired to pay to the Holder upon theconsummation ofandas acondition to such transactionanamountequal to the Default Amount(as defined in ArticleIII) or(ii) be treated pursuant toSection 1.6(b) hereof.“Person” shall mean any individual, corporation, limited liability company,partnership,association, trust or otherentity or organization.
(b)Adjustment Due to Merger,Consolidation, Etc. If,atany time when this Note is issuedand outstandingandprior toconversion ofall of the Notes, there shall beany merger,consolidation,exchange of shares,recapitalization,reorganization, or other similarevent,as aresult of which shares ofCommonStock of theCompany shall bechangedinto the sameor a different numberof sharesofanotherclass orclassesof stock or securities of theCompany oranotherentity, or incase ofany sale orconveyance ofall or substantiallyall of theassets of theCompany other than inconnection with a plan ofcomplete liquidation of theCompany, then the Holder of this Note shall thereafter have theright toreceive uponconversion of this Note, upon thebasisand upon the
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termsandconditions specifiedhereinand in lieuof the sharesofCommonStock immediately theretofore issuable uponconversion, such stock, securities orassets which the Holder would have beenentitled toreceivein such transaction had this Note beenconverted infull immediately prior to such transaction(withoutregard toany limitations onconversion setforth herein),and inany suchcaseappropriate provisions shall be made withrespect to therightsand interests of the Holderof this Note to theend that the provisions hereof(including, without limitation, provisionsforadjustment of theConversionPriceand of the number of shares issuable uponconversion of the Note) shall thereafter beapplicable,as nearlyas maybe practicable inrelation toany securities orassets thereafterdeliverable upon theconversion hereof. The Company shall notaffectany transaction described in thisSection 1.6(b) unless(a) itfirst gives,to theextent practicable, thirty(30) days prior written notice(but inanyeventat leastfifteen(15) daysprior written notice) of therecorddate of the special meeting of shareholders toapprove, or if there is no suchrecord date, theconsummation of, such merger,consolidation,exchangeof shares,recapitalization,reorganization or othersimilarevent or sale ofassets(duringwhich time the Holder shall beentitled toconvert this Note)and(b) theresulting successor oracquiringentity(if not the Company)assumesby written instrument the obligations of thisSection 1.6(b). Theabove provisions shall similarlyapply to successiveconsolidations, mergers, sales, transfers or shareexchanges.
(c)Adjustment Due to Distribution.If theCompany shall declare or makeany distribution of itsassets(orrights toacquire itsassets) to holders ofCommonStockas a dividend, stockrepurchase,by way ofreturn ofcapital or otherwise(includingany dividend or distribution to theCompany’s shareholders incash or shares(orrights toacquire shares) ofcapital stock of a subsidiary(i.e., a spin-off))(a“Distribution”), then the Holder of this Note shall beentitled, uponanyconversion of this Noteafter the date ofrecordfor determining shareholdersentitled tosuch Distribution, toreceive theamountof suchassets which wouldhave been payable to the Holder withrespect to the shares ofCommonStock issuable upon suchconversion had such Holder been the holder of such shares ofCommonStock on therecord datefor the determination of shareholdersentitled to such Distribution.
(d)Adjustment Due to DilutiveIssuance.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 executed and made effective subsequent to the date of this Note 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.
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(e) PurchaseRights.If,atany time whenany Notesare issuedand outstanding, theCompany issuesanyconvertiblesecurities orrights to purchase stock, warrants, securities or other property(the“PurchaseRights”) prorata to therecord holders ofanyclass ofCommonStock, thenthe Holder of this Note will beentitled toacquire, upon the termsapplicable to suchPurchaseRights, theaggregatePurchaseRights which such Holdercould haveacquired if such Holder had held the number of shares ofCommonStockacquirable uponcompleteconversion of this Note(withoutregard toany limitations onconversioncontained herein) immediately before the date on which arecord is takenfor the grant, issuanceor sale of suchPurchaseRights or, if no suchrecord is taken, the dateas of which therecord holders ofCommonStockare to be determinedfor thegrant, issue or sale of suchPurchaseRights.
(f)Notice of Adjustments. Upon the occurrenceofeachadjustment orreadjustment of theConversionPriceas aresult of theevents described in thisSection 1.6, theCompany,at itsexpense, shall promptlycompute suchadjustment orreadjustmentand prepareandfurnish to the Holder of acertificate settingforth suchadjustment orreadjustmentand showing in detail thefacts upon which suchadjustment orreadjustment is based. TheCompanyshall, upon the writtenrequestatany time of the Holder,furnish to such Holder a likecertificate settingforth(i) suchadjustment orreadjustment,(ii) theConversionPriceat the time ineffectand(iii) the number of shares ofCommonStockand theamount, ifany, of other securities or property whichat the time would bereceived uponconversion of the Note.
1.7 Security.As Security for the Company's obligations contained herein and in all Notes issued by the Company to the Holder, the Holder shall be granted an unconditional first priority 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 until the balance of all Notes has been reduced to $0. "Any and all property," as described herein shall be inclusive of, but not limited to, assets reported by the Company on its SEC filings, cash, inventory, accounts receivable, intellectual property rights, equipment and property. The Investor is authorized to make all filings the Investor, in its discretion, deems necessary to evidence its security interests.
1.8 StatusasShareholder. Upon submission of aNotice ofConversionby a Holder,(i) the sharescovered thereby(other than the shares, ifany,whichcannot be issued because their issuancewouldexceed such Holder’sallocated portion of theReserved Amount or MaximumShare Amount) shall be deemedconverted into shares ofCommonStockand(ii) the Holder’srightsas a Holder of suchconvertedportion of this Note shallceaseand terminate,excepting only theright toreceivecertificatesfor such shares ofCommonStockand toanyremedies provided herein or otherwiseavailableat law or inequity to such Holder because of afailureby the Company tocomply with the terms of this Note. Notwithstanding theforegoing, if a Holder has notreceivedcertificatesforall shares ofCommonStock prior to the tenth(10th) business dayafter theexpiration of the Deadline withrespect to aconversion ofany portion of this Noteforanyreason, then(unless the Holder otherwiseelects toretain its statusas a holder ofCommonStockby so notifying the Company) the Holder shallregain therights of a Holder of this Note withrespect to such
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unconverted portions of this Noteand theCompany shall,as soonas practicable,return such unconverted Note to the Holderor, if the Notehas not been surrendered,adjust itsrecords toreflect that such portion of this Note has not beenconverted.Inallcases, the Holder shallretainall of itsrightsandremedies(including, without limitation,(i) theright toreceiveConversion DefaultPayments pursuant toSection 1.3 to theextentrequired therebyfor suchConversion Defaultandany subsequentConversion Defaultand(ii) theright to have theConversionPrice withrespect to subsequentconversions determined inaccordance withSection 1.3)for theCompany’sfailure toconvert this Note.
1.9 Prepayment. Maker may prepay this Note, in accordance with the following schedule: If within 60 calendar days from the execution of this Note, 125% of all outstanding principal and interest due on each outstanding Note in one payment; After 60 calendar days from the execution of the note and within 120 days from execution, 130% of all outstanding principal and interest due on each outstanding Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note in one payment.
1.10 No Short Sales.No short sales shall be permitted by the Holder or its affiliates at any time while this Note is issued and outstanding in any amount.
ARTICLEII.CERTAINCOVENANTS
2.1 Distributions onCapitalStock.So longas theCompany shall haveany obligation under this Note, theCompany shall not without the Holder’s writtenconsent(a)pay, declare or setapartfor such payment,any dividend or other distribution(whether incash, property or othersecurities) on sharesofcapital stock other than dividends on sharesofCommonStock solely in theform ofadditional shares ofCommonStock or(b) directly or indirectly or throughany subsidiary makeany other payment or distribution inrespect of itscapital stockexceptfor distributions pursuant toany shareholders’rights plan which isapprovedby a majority of theCompany’s disinterested directors.
2.2 Restriction onStockRepurchases.So longas theCompany shall haveany obligation under this Note, theCompany shall not without the Holder’s writtenconsentredeem,repurchase or otherwiseacquire(whetherforcash or inexchangefor propertyor other securities or otherwise) inany one transaction or series ofrelated transactionsany sharesofcapital stock of theCompanyoranywarrants,rights or options to purchaseoracquireanysuch shares.
2.3 Borrowings.So longas theIssuer shall haveany obligation under this Note, theIssuer shall not, without written notice to the holder,create, incur,assumeguarantee,endorse,contingentlyagree to purchase or otherwise become liable upon the obligation ofanyperson,firm, partnership,joint venture orcorporation,exceptby theendorsement of negotiable instrumentsfor deposit orcollection, or suffer toexistany liabilityfor borrowed money,except(a) borrowings inexistence orcommitted on the date
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hereofand of which theIssuer has informed Holder in writingprior to thedatehereof,(b) indebtedness to tradecreditors orfinancial institutions incurred in the ordinarycourse of business or(c) borrowings, the proceeds of which shall be used torepay this Note.
2.4 Sale of Assets.So longas theCompany shall haveany obligation under this Note, theCompany shall not, without the Holder’s writtenconsent, sell, lease or otherwise dispose ofany significant portion of itsassets outside the ordinarycourse of business. Anyconsent to the disposition ofanyassets maybeconditioned on a specified use of the proceeds of disposition.
2.5 Advances andLoans.So longas theCompanyshall haveany obligation under this Note, theCompany shall not, withoutthe Holder’s writtenconsent, lend money,givecredit or makeadvances toany person,firm, joint venture orcorporation, including, without limitation, officers, directors,employees, subsidiariesandaffiliates of theCompany,except loans,credits oradvances(a) inexistence orcommitted on the date hereofand which theCompanyhas informed Holder in writingprior to the date hereof,(b) made in the ordinarycourse of businessor(c) not inexcess of $50,000.
ARTICLEIII. EVENTS OF DEFAULT
Ifany of thefollowingevents of default(each,an“Event ofDefault”) shall occur:
3.1 FailuretoPayPrincipalorInterest.TheCompanyfails topay the principal hereof or interest thereon when due on this Note, whetherat maturity, uponacceleration or otherwise.
3.2 Conversionand theShares.TheCompanyfails to issue shares ofCommonStock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exerciseby the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transferagent to transfer (issue) (electronically or in certificated form) any certificate for shares ofCommon Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and whenrequired by this Note, theCompanydirects its transferagent not to transfer ordelays, impairs, and/or hinders its transferagent in transferring (or issuing) (electronically or in certificated form) any certificate for shares ofCommonStock 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 transferagent not to removeor impairs,delays, and/or hinders its transferagentfromremoving) anyrestrictive legend (or to withdrawany stop transfer instructions in respect thereof) on any certificate for any shares ofCommonStock issued to the Holder upon conversion of or otherwise pursuant to this Note as and whenrequiredby this Note (or makes any written 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, statementor 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
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Conversion.It isan obligation of theCompany toremaincurrent in its obligations to its transferagent.It shall beanevent of default of this Note, if aconversion of this Note is delayed, hindered orfrustrated due to a balance owed by theCompany to its transferagent.Ifat the option of the Holder, the Holderadvancesanyfunds to theCompany’s transferagent in order to process aconversion, suchadvancedfunds shall be paidby theCompany to the Holder withinfortyeight(48) hours of a demandfrom the Holder.
3.3 BreachofCovenants. TheCompany breachesanycovenantor other termorconditioncontained in this Noteandanycollateral documents including but not limited to theEquity Financing Agreement and the Registration Rights Agreement.
3.4 Breach of Representations and Warranties. Any representationor warranty of theCompanymade herein or in anyagreement, statement or certificategiven in writing pursuanthereto or in connection herewith (including, without limitation, thePurchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with thepassage of time will have) a material adverseeffect on the rights of the Holder with respect to this Note or the Equity Financing Agreement and the Registration Rights Agreement.
3.5 Receiver orTrustee.TheCompany orany subsidiary of theCompany shall makeanassignmentfor the benefit ofcreditors, orapplyfor orconsent to theappointment of areceiveror trusteefor it orfor a substantialpart of its property or business, or such areceiver or trustee shall otherwise beappointed.
3.6 Judgments. Any money judgment,writ or similar process shall beentered orfiledagainst theCompanyorany subsidiary of theCompany orany of its property or otherassetsfor more than $50,000,and shallremain unvacated, unbonded or unstayedfor aperiod of twenty(20)days unless otherwiseconsented toby the Holder, whichconsent will not be unreasonably withheld.
3.7 Bankruptcy.Bankruptcy, insolvency,reorganization or liquidation proceedingsor otherproceedings, voluntaryor involuntary,forrelief underanybankruptcylaw orany law forthe relief of debtors shall be instituted by oragainst theCompany orany subsidiary of theCompany.
3.8 Delisting ofCommonStock. If theCompany shallfail to maintain in good standing the listingoftheCommonStock onthe over-the-counter market operated by OTC Markets Group, Inc. oranequivalentreplacementexchange, theNasdaq National Market, theNasdaqSmallCap Market or the New YorkStock Exchange or if the Company's shall lose the "bid" price for its common stock on any given trading day.
3.9 Failure toComply with the ExchangeAct. If theCompany shallfail tocomply, in a timely manner, with thereportingrequirements of the Exchange Act;and/or theCompany shallcease to be subject to thereportingrequirements of the ExchangeAct.
3.10 Liquidation. Any dissolution, liquidation, or winding up ofCompany or any substantial portion of its business.
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3.11 Cessation of Operations. Anycessation of operationsbyCompany orCompanyadmits it is otherwisegenerally unable to pay its debtsas such debts become due, provided, however, thatany disclosure of theCompany’sability tocontinueas a“goingconcern” shall not beanadmission that theCompanycannot pay its debtsas theybecome due.
3.12 Maintenanceof Assets. ThefailurebyCompany to maintainany material intellectual propertyrights, personal,real property or otherassets whicharenecessary toconduct its business(whether now or in thefuture).
3.13 FinancialStatementRestatement.The restatement ofany financial statements filedby theCompanywith theSEC for anydate orperiodfrom twoyears prior to theIssue 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 adverseeffect on the rights of the Holder with respect to this Note or supporting documents.
3.14 ReverseSplits. 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 theevent thattheCompany proposes toreplace its transferagent, theCompanyfails to provide, prior to theeffectivedate of suchreplacement, afullyexecutedIrrevocableTransferAgentInstructions in aformas initially delivered pursuant to thePurchaseAgreement (including but not limited to the provision to irrevocablyreserve shares ofCommonStock intheReserved Amount) signedby the successor transferagent toCompanyand theCompany.
3.16 Cross-Default. Notwithstandinganything to thecontrarycontained in this Note or the otherrelated orcompanion documents, a breach or defaultby the Company ofanycovenant or other termorconditioncontained inany of the OtherAgreements,after the passage ofallapplicable noticeandcure or grace periods, shall,at the option of the Holder,beconsidered adefault under this Noteand the OtherAgreements, in whichevent the Holder shall beentitled(but in noeventrequired) toapplyallrightsandremediesof the Holder under the terms of this Noteand the OtherAgreementsbyreason of a default under said OtherAgreement or hereunder.“Other Agreements” means,collectively,allagreementsand instruments between,amongorby:(1) theCompany,and, orfor the benefit of,(2) the Holderandanyaffiliate of the Holder,including, without limitation, promissory notes;provided, however, the term“OtherAgreements” shall not include therelated orcompanion documents to this Note. Each of the loan transactions between the Holder and the Company will becross-defaulted witheach other loan transactionand withall otherexistingandfuture debt of Company.
Upon the occurrenceand during thecontinuation ofany Event ofDefault specified inSection 3.1(solely withrespect tofailure to pay the principal hereof or interest thereon when dueat the Maturity Date), the Note shall becomeimmediately dueandpayableand the Company shall pay to the holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).
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UPON THE OCCURRENCE AND DURINGTHECONTINUATIONOF ANY EVENTOF DEFAULTSPECIFIEDINSECTION 3.2, THE NOTESHALLBECOMEIMMEDIATELY DUE ANDPAYABLEAND THECOMPANYSHALLPAY TO THE HOLDER,IN FULLSATISFACTIONOFITSOBLIGATIONS HEREUNDER, ANAMOUNT EQUAL TO: (Y)THE DEFAULTSUM (AS DEFINED HEREIN); MULTIPLIEDBY(Z) TWO (2). Upon the occurrenceand during thecontinuationofany Event ofDefault specified inSections 3.1(solely withrespect tofailure to pay the principal hereof or interest thereon when due on this Note upon a Trading MarketPrepayment Event pursuant toSection 1.7or uponacceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,3.12, 3.13, 3.14,and/or 3. 15exercisable through the delivery of written notice to the Companyby such Holders(the“Default Notice”),and upon the occurrence ofan Event ofDefault specified theremaining sections of ArticlesIII(other thanfailure topay the principalhereof or interest thereonat the Maturity Date specified inSection 3,1 hereof), the Note shall become immediately dueand payableand the Company shall pay to the Holder, infull satisfaction of its obligations hereunder,anamountequal to the greater of(i) 150%times thesumof(w) the then outstanding principalamount of this Noteplus(x)accruedand unpaid interest on the unpaid principalamount of this Note to the date ofpayment(the“MandatoryPrepayment Date”)plus(y)Default Interest, ifany, on theamountsreferred to inclauses(w)and/or(x)plus(z)anyamounts owed to the Holder pursuant toSections 1.3and 1.4(g)hereof(the then outstandingprincipalamount of this Note to the dateof paymentplus theamountsreferred to inclauses(x),(y)and(z) shallcollectively be knownas the“DefaultSum”) or(ii) the“parityvalue” of the DefaultSum to be prepaid, where parityvalue means(a) the highest numberof shares ofCommonStock issuable uponconversion of or otherwise pursuant to suchDefaultSum inaccordance withArticle I, treating the Trading Day immediately preceding theMandatoryPrepayment Dateas the“Conversion Date”for purposes of determining the lowestapplicableConversionPrice, unless the Default Eventarises as aresult of a breach inrespect of a specificConversion Date in whichcase suchConversion Date shall be theConversion Date),multipliedby(b) the highestClosingPricefor theCommonStock during the period beginning on the date offirst occurrenceof the Event ofDefaultandending one day prior to the MandatoryPrepayment Date(the“Default Amount”)andall otheramounts payable hereunder shall immediatelybecome dueand payable,all without demand, presentment or notice,all of which herebyareexpresslywaived, together withallcosts, including, without limitation, legalfeesandexpenses, ofcollection,and the Holder shall beentitled toexerciseall otherrightsandremediesavailableat law or inequity.
If theCompanyfails to pay theDefault Amount withinfive(5) business daysof written notice that suchamount is dueandpayable, then the Holder shall have therightatany time, so longas theCompanyremains in default(and so longand to theextent that thereare sufficientauthorized shares), torequire theCompany, upon written notice, to immediately issue, in lieu of the Default Amount, the number of sharesofCommonStock of theCompanyequal to the Default Amount dividedby theConversionPricethen ineffect.
ARTICLEIV.MISCELLANEOUS
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4.1 Failure orIndulgenceNotWaiver.Nofailureor delay on the part of the Holder in theexercise ofany power,rightor privilege hereunder shall operateas a waiver thereof, nor shallany single or partialexercise ofany such power,right or privilege preclude other orfurtherexercise thereof or ofany otherright, power or privileges. Allrightsandremediesexisting hereunderarecumulative to,and notexclusive of,anyrights orremedies otherwiseavailable.
4.2 Notices. All notices, demands,requests,consents,approvals,and othercommunicationsrequired or permitted hereunder shall be in writingand, unless otherwise specifiedherein, shall be(i)personallyserved,(ii) deposited in themail,registeredorcertified,returnreceiptrequested, postage prepaid,(iii)deliveredbyreputableaircourier service withchargesprepaid,or(iv) transmittedby handdelivery, email, orfacsimile,addressedasset forth belowor to such otheraddressas such party shall have specifiedmostrecentlyby written notice. Any notice or othercommunicationrequired or permitted to be given hereunder shallbe deemedeffective(a) upon hand deliveryor deliverybyfacsimile, withaccurateconfirmation generatedby the transmittingfacsimile machine,at theaddress or number designatedbelow(if delivered on a businessday during normal business hours where such notice is to bereceived),or thefirst businessdayfollowing such delivery(if delivered other than on a businessday during normal business hours where such notice is to bereceived) or(b) on the second business dayfollowing the date of mailingbyexpresscourier service,fullyprepaid,addressed to suchaddress,or uponactualreceipt of suchmailing, whichever shallfirst occur. Theaddressesfor suchcommunications shall be:
If to theCompany, to:
Rocky Mountain High Brands, Inc.
9101 LBJ Freeway, Suite 200
Dallas, TX 75243
Attn: Michael Welch, CEO
If to the Holder:
GHS Investments, LLC.
420 Jericho Tpke Suite 207
Jericho, NY 11753
4.3 Amendments. This Noteandany provision hereof may only beamendedbyan instrument in writing signedby the Companyand the Holder. The term“Note”andallreference thereto,as used throughout this instrument, shall mean this instrument(and the other Notes issued pursuant to thePurchase Agreement)as originallyexecuted, or if lateramended or supplemented, thenas soamended or supplemented.
4.4 Assignability.This Note shall be binding upon theCompanyand its successorsandassigns,and shall inure to be the benefit of the Holderand its successors
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andassigns. Notwithstandinganything in this Note to thecontrary, this Note may be pledgedascollateral inconnection with abonafidemargin account or other lending arrangement.
4.5 Cost ofCollection.Ifdefault is made in the paymentof this Note, the
Company shall pay theHolder hereofcosts ofcollection, includingreasonableattorneys’fees.
4.6 GoverningLaw.This Noteshallbegovernedbyandconstrued inaccordance with the laws of theState of Nevada withoutregard to principles ofconflicts of laws. Anyaction broughtbyeither partyagainst the otherconcerning the transactionscontemplatedby this Note shall be brought only in the state orfederal courts located in New York City, New York. The parties to this Note hereby irrevocably waiveany objection to jurisdictionand venue ofanyaction instituted hereunderand shall notassertany defensebased on lackof jurisdictionor venue or based uponforum nonconveniens. TheCompanyand Holder waive trialby jury.The prevailing party shall beentitled torecover from the other party itsreasonableattorney'sfeesandcosts. In theevent thatany provision of this Note orany otheragreement delivered inconnection herewith is invalid or unenforceable underanyapplicable statute orrule of law, then such provision shall be deemed inoperative to theextent that it mayconflict therewithand shall be deemed modified toconform with such statute orrule of law.Any such provision which may prove invalid or unenforceable underany law shall notaffect thevalidity orenforceability ofany otherprovision ofanyagreement. Each partyhereby irrevocably waives personal service of processandconsents to process being served inany suit, action or proceeding inconnection with this Agreement orany otherTransaction Documentby mailing acopy thereof viaregistered orcertified mailorovernight delivery(withevidence of delivery) to such partyat theaddress ineffectfor notices to it under this Agreementandagrees that such service shallconstitutegoodand sufficient service of processand notice thereof. Nothingcontained herein shall be deemed to limit inany wayanyright to serve process inany other manner permittedby law. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction, such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
4.7 CertainAmounts.Whenever pursuant to this Note theCompany isrequired to payanamount inexcess of the outstanding principalamount(or the portion thereofrequired to be paidat that time) plusaccruedand unpaid interest plusDefaultInterest on such interest, theCompanyand the Holderagree that theactual damages to the Holderfrom thereceipt ofcash payment on this Note maybe difficult to determineand theamount to be so paidby theCompanyrepresents stipulated damagesand not a penaltyand isintended tocompensate the Holder inpartfor loss of the opportunity toconvert this Noteand toearn areturnfrom the sale of shares ofCommonStockacquired uponconversion of this Noteat a price inexcess of the price paidfor such shares pursuant to this Note. TheCompanyand theHolder herebyagree that suchamount of stipulated damages is not plainly disproportionate to the possible loss to the Holderfrom thereceipt of acash payment without the opportunity to convert this Note into shares of Common Stock.
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4.8 Equity FinancingAgreement.By itsacceptance of this Note,each partyagrees to be boundby theapplicable terms of the Equity Financing Agreement and supporting documents of same date.
4.9 Notice ofCorporate Events.Exceptas otherwise provided below, the Holder of this Note shall have norightsas a Holder ofCommonStock unlessand only to theextent that itconverts this Note intoCommonStock. TheCompany shallprovide the Holder with prior notification ofany meeting of theCompany’s shareholders(andcopies of proxy materialsand other information sent to shareholders).In theevent ofany takingby theCompany of arecord of its shareholdersfor the purpose of determining shareholders whoareentitled toreceive payment ofany dividend or other distribution,anyright to subscribefor, purchaseor otherwiseacquire(includingby wayof merger,consolidation,reclassification orrecapitalization)any share ofanyclass orany other securities or property, or toreceiveany otherright, orfor the purpose of determining shareholders whoareentitled to vote inconnection withanyproposed sale, leaseorconveyance ofall or substantiallyall of theassets of theCompany orany proposed liquidation, dissolution or winding up of theCompany, theCompanyshall mail anotice to the Holder,at least twenty(20)days prior to therecord date specified therein(or thirty(30) days prior to theconsummation of the transaction orevent, whichever isearlier), of the date on whichany suchrecord is to be takenfor the purposeof such dividend, distribution,right or otherevent,and a brief statementregarding theamountandcharacter of such dividend, distribution,right or otherevent to theextent knownat such time. TheCompany shall make a publicannouncementofanyeventrequiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder inaccordance with the terms of thisSection 4.9.
4.10 Remedies.TheCompanyacknowledges that a breachby it of its obligations hereunderwillcause irreparableharm to the Holder,by vitiating the intentand purpose of the transactioncontemplated hereby. Accordingly, theCompanyacknowledges that theremedyat lawfor a breach of its obligations under this Note will be inadequateandagrees, in theeventof abreach or threatened breachby theCompanyof theprovisions of this Note, that the Holder shall beentitled, inaddition toall otheravailableremediesat law or inequity,and inaddition to the penaltiesassessable herein, toan injunction or injunctionsrestraining, preventing orcuringany breach of this Noteand toenforce specifically the termsand provisions thereof, without the necessityof showingeconomic lossand withoutany bond or other securitybeingrequired.
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INWITNESSWHEREOF,Holder andCompanyhavecausedthisSecond Amended and RestatedNote to be signed inits nameby its respective dulyauthorized officer:
GHS Investments, LLC
By:/s/ Sarfraz Hajee
Print: Sarfraz Hajee
Title/Date: Member 1/11/2018
Rocky Mountain High Brands, Inc.
By:/s/ Michael R. Welch
Print: Michael R. Welch
Title/Date: CEO 1/11/2018
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