Blum Holdings Inc (BLMH)

[Art Vandeley]

Notes

Each Note accrues interest at a rate of 12% per annum and has a maturity date of 18 months after issuance. All principal and interest due and owing under each Note is convertible into shares of Common Stock of the Company at any time at the election of the holder thereof, at a conversion price equal to approximately $0.30753 per share, subject to adjustment. Beginning on August 5, 2014, September 5, 2014, October 5, 2014, November 5, 2014, December 5, 2014, January 5, 2015 and February 5, 2015, (each a "Commencement Date") and continuing on each of the following eleven successive months after each such Commencement Date, the Company is obligated to pay 1/12 th of the face amount of such Note outstanding and accrued interest.

The Notes are currently convertible into a total of 12,766,750 shares of Common Stock, which may increase in the future if the conversion price is adjusted upon our sale of equity at a price less than the then-conversion price. Pursuant to the Amendment, we agreed to reserve an aggregate of 25,533,500 shares of Common Stock for conversion of the Notes upon such adjustment, all of which are registered hereby.

Warrants

Under the terms of the Purchase Agreement, we agreed to issue to Dominion Warrants to purchase up to that number of shares of Common Stock equal to 50% of the principal amount of the Notes issuable divided by the conversion price, with an exercise price equal to approximately $0.30753 per share, subject to adjustment. The exercise price and the number of shares underlying the Warrants are subject to adjustment upon our sale of equity at a price less than the then-exercise price. The Warrants have a “cashless” exercise feature and a term of four years.

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