EXHIBIT 10.1

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (the “Agreement”) is made and entered into
by and between GROWLIFE, INC. (the “Company”), a corporation duly organized
under the laws of the State of Delaware, with offices at 500 Union Street, Suite
406, Seattle, WA 98101, and ROBERT E. HUNT (“Executive”).  The Company and
Executive shall be individually referred to herein as “party” and collectively
as “parties.”

RECITALS

WHEREAS, Executive and the Company are parties to an Executive Services
Agreement (“ESA”) dated June 7, 2013;

WHEREAS, pursuant to the ESA, Executive was employed as the Executive Vice
President of the Company and the President of the Company’s fully-owned
subsidiary, GrowLife Hydroponics, Inc. from on or about June 7, 2013 (“Hire
Date”) through May 23, 2013 (“Termination Date”);

WHEREAS, Executive served as a member of the Company’s Board of Directors from
on or about June 7, 2013 through June 2, 2014;

WHEREAS, Executive and the Company are parties to a Noncompetition,
Nonsolicitation, and Nondisclosure Agreement (“NCA”) dated June 7, 2013;

WHEREAS, Executive asserts that he was wrongfully terminated from his employment
with the Company;

WHEREAS, the Company has denied and continues to deny Executive’s allegations
with respect to his employment, and any wrongdoing whatsoever (the “Employment
Dispute”);

WHEREAS, the Company believes Executive wrongfully is in possession of and/or
control over the Company’s intellectual property, trade secrets, copyrighted
materials, and/or “Confidential Information” as that term is defined in the ESA,
comprised of the websites www.growlifehydroponics.com and www.58hydro.com (the
“Company Materials”);

WHEREAS, Executive has denied and continues to deny the Company’s allegations
with respect to the Company Materials, and any wrongdoing whatsoever (the
“Company Materials Dispute”);

WHEREAS, the Company and Executive desire to settle fully and financially any
and all issues related to the Employment Conflict and Company Material’s
Conflict;

NOW, THEREFORE, for the valuable consideration described herein, the adequacy of
which is hereby expressly acknowledged, the parties hereby agree as follows:

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AGREEMENT

1.

Consideration.  The Company, for full payment of all compensatory obligations
owed to Executive as set forth in this Agreement, shall compensate the Executive
pursuant to the following terms below:

 

a.

The Company shall pay Executive a cash severance of fifty thousand dollars
($50,000), payable in five (5) equal installments of ten thousand dollars
($10,000), with the first payment to be made on or before October 25, 2014 and
the subsequent four (4) payments to be made on or before the 15th day of each
month beginning November 2014 through and including February 2015 (the
“Severance Payments”).  The Severance Payments shall be made directly to
Executive through the Company’s regular payroll via direct deposit and must be
received by the Executive no later than 5:00 pm. EST on the due date.  Executive
shall provide the Company with the relevant information to make the payments via
direct deposit.

 

 

 

 

b.

The Company will reimburse Executive for the health insurance premium payments
he made from the Termination Date through December 2014 in the total amount of
seven thousand one hundred fifty two dollars and six cents ($7,152.06).  The
reimbursement for health insurance premiums shall be made in five equal
installments of one thousand four hundred thirty dollars and forty one cents
($1,430.41), with the first payment to be made on or before October 25, 2014 and
the subsequent four (4) payments to be made on or before the 15th day of each
month beginning November 2014 through and including February 2015.  Executive
will notify the Company of any changes in the amount of the Health Insurance
Payments as a result of the addition of dependent(s) and the Company agrees to
pay any increase in the Health Insurance Payments as a result thereof.  The
Company acknowledges that failure to timely make the Health Insurance Payments
may result in a loss of coverage for the Executive and/or his dependants and may
irreparably harm the Executive.  The Company agrees that in the event it fails
to timely make a Health Insurance Payment, it will reimburse Executive for any
and all costs, expenses or fees incurred as a result of loss of coverage,
including, but not limited to, out-of-pocket medical costs and costs for
reinstating coverage.

 

 

 

 

c.

The Company shall pay Executive for 5.7 days of accrued and outstanding vacation
time at the rate of two hundred ninety-eight dollars and eighty cents per day
($298.80) for a total of one thousand seven hundred six dollars and
seventy-seven cents ($1706.77) (“Vacation Payment”).  The Company shall also
reimburse Executive for the costs he incurred in purchasing Company Materials,
including the website domains for www.growlifehydroponics.com and
www.58hydro.com for a total of $357.76 (the “Reimbursement”).  The Vacation
Payment and Reimbursement shall be made in five equal installments of four
hundred twelve dollars and ninety one cents ($412.91) with the first payment to
be made on or before October 25, 2014 and the subsequent four (4) payments to be
made on or before the 15th day of each month beginning November 2014 through and
including February 2015.

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d.

As of the time of execution of this Agreement, there are no brokerage houses
accepting shares of the Company’s common stock while the Company remains on the
grey market.  Accordingly, the Company agrees that it will grant Executive six
million (6,000,000) shares of common stock of the Company, or the equivalent
thereof in any surviving entity following a Change in Control of the Company
(the “Stock Grant”), subject to any applicable laws, rules and regulations, if
and when one of the following events occurs (“Triggering Event”):  (i) the
Financial Industry Regulatory Authority (“FINRA”) permits the Company to resume
trading on the Over-the-Counter (“OTC”) QX or QB or other comparable quotation
medium where a Securities and Exchange Commission (“SEC”) approved market maker
has been approved to quote, buy and sell the companies’ stock; (ii) the
Company’s stock is traded on Nasdaq, NYSE, BATS or Direct Edge; or (iii) the
Company experiences a Change in Control.  A Change in Control shall be deemed to
have occurred at such time as (i) any change in the ownership of more than fifty
percent (50%) of the voting capital stock of the Company in one or more related
transactions; (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of the Company; (iii) any merger, consolidation or acquisition of the
Company with, by or into another corporation, entity or person; or (iv) a
determination by the Company’s Board that a Change in Control has occurred,
whether or not any event described above has occurred or is contemplated.  The
Stock Grant shall be made within five (5) business days of the Triggering Event
and the stock certificates for the Stock Grant shall be delivered to Executive
at his residence by mail within five (5) business days of the Stock Grant.

 

 

 

 

e.

Actual receipt of the Severance Payments, Health Insurance Payments, Vacation
Payment and Reimbursement as required by Sections 1.a., 1.b., and 1.c. is an
express condition precedent to all of Executive’s obligations and releases under
this Agreement, and Executive shall retain all of his rights and remedies
against the Company until the Severance Payments, Health Insurance Payments,
Vacation Payment and Reimbursement are received in full by Executive or on
behalf of Executive.

2.

Remedies Upon Default; Cure Period.

 

a.

The Company’s failure to timely make any payments set forth in Section 1.a.
above constitutes an Event of Default.  Executive shall provide the Company with
written notice of an Event of Default and the Company shall have five (5) days
from the date Executive mailed the written notice to cure such an Event of
Default (the “Grace Period”).  Notice shall be given by delivering by mail a
written notice of default to the Company’s Chief Executive Officer at its
offices at 500 Union Street, Suite 406, Seattle, WA 98101.

 

 

 

 

b.

In the event of the Company’s failure to cure an Event of Default within the
Grace Period, the outstanding balance of payments set forth in Section 1.a. will
accelerate and become due and payable in full at the Mandatory Default Amount.
 The “Mandatory Default Amount” is equal to one hundred fifteen percent (115%)
of the outstanding balance of the payments set forth in Section 1.a. above.

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3.

Releases.

 

a.

Executive hereby expressly and irrevocably releases and forever discharges the
Company and all of its divisions, parents, subsidiaries, affiliates, related
entities, successors, assigns, officers, directors, partners, employees, agents,
attorneys and representatives (collectively “Company’s Agents”) from any and all
claims which Executive has or may have from the beginning of time to the date
hereof in connection with any violation of the ESA, including but not limited to
tort claims, bad faith claims, contract claims, wage claims, claims for attorney
fees, demands, liabilities, debts, accounts, obligations, damages, compensatory
damages, punitive damages, penalties, liquidated damages, costs, expenses,
actions and causes of action, at law or in equity, either known or unknown This
release does not encompass any claims or causes of action, known or unknown, by
the Executive against the Company arising out of or related to breach of this
Agreement and/or the Company’s failure to deliver the Stock Grant required by
Section 1.d.

 

 

 

 

b.

The Claims that Executive is releasing and discharging under this Agreement
include, but are not limited to, any Claims arising out of or in connection
with:  Executive’s employment relationship with the Company and/or the
termination of that relationship (including but not limited to any Claims for
wrongful discharge or breach of the covenant of good faith and fair dealing),
any and all federal and state civil rights laws, ordinances, regulations or
orders, based on charges of discrimination on account of race, color, religion,
sex, sexual orientation, age, citizenship, national origin, physical handicap,
mental or physical disability, medical condition, genetic characteristics,
marital status, pregnancy, veteran status or any other discrimination prohibited
by such laws, ordinances, regulations or orders (including but not limited to
Title VII of the Civil Rights Act of 1964, as amended, 42 USC Section 2000, et
seq.; Americans with Disabilities Act; Civil Rights Act of 1866, and Civil
Rights Act of 1991; 42 USC Section 1981, et seq.; Age Discrimination in
Employment Act, as amended, 29 USC Section 621, et seq.; Equal Pay Act, as
amended, 29 USC Section 206(d); regulations of the Office of Federal Contract
Compliance, 41 CFR Section 60, et seq.; California Fair Employment and Housing
Act, and the California Government Code Section 12940, et seq.).  The Claims
which Executive is releasing and discharging under this Agreement shall not
include matters which by law cannot be released, including claims for
unemployment compensation benefits, workers compensation benefits, health
insurance benefits under COBRA, claims regarding vested retirement plan benefits
under ERISA, or indemnification pursuant to Labor Code section 2802.

 

 

 

 

c.

The Company hereby expressly and irrevocably releases and forever discharges
Executive and all of his successors, assigns, agents, attorneys and
representatives (collectively “Executive’s Agents”) from any and all claims
which the Company has or may have from the beginning of time to the date hereof
in connection with any violation of the ESA, the NCA, and Executive’s
possession, control, retention, access, and/or exposure to the Company
Materials, including but not limited to tort claims, bad faith claims, contract
claims, wage claims, claims for attorney fees, demands, liabilities, debts,
accounts, obligations, damages, compensatory damages, punitive damages,
penalties, liquidated damages, costs, expenses, actions and causes of action, at
law or in equity, either known or unknown.  This release does not encompass any
claims or causes or action by the Company against Executive, known or unknown,
arising out of or related to any allegations concerning Executive’s acts and/or
omissions on behalf of the Company in his capacity as an officer or director of
the

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Company, including but not limited to claims for breach of fiduciary duty and/or
any claims which have or could potentially be asserted against the Company as
part of the actions styled Roof v. Scott, et. al., currently pending before the
United States District Court for the Central District of California under case
No. 2:14-cv-03777 and/or Romero v. GrowLife, Inc., currently pending before the
United States District Court for the Central District of California under case
No. 2:14-cv-03015.  All such claims and/or causes of action are expressly
reserved by the Company.

4.

Waiver under Civil Code Section 1542.  It is understood by each of the parties
that there is a risk that it may incur or suffer loss, damage or injuries which
are in some way caused by or related to the subject matter of the releases
contained in Sections 3.a., 3.b., and 3.c., as applicable, of this Agreement,
but which are unknown or unanticipated at the time of execution of this
Agreement.  Further, there is a risk that loss or damage presently known may be
or become greater than either party now expects or anticipates.  Each of the
parties assumes such risks that the releases contained in Sections 3.a., 3.b.,
and 3.c. of this Agreement shall apply to all unknown and/or unanticipated
results arising from or relating to the subject matter of the releases contained
in Sections 3.a., 3.b., and 3.c. of this Agreement, and, EXECUTIVE WAIVES
AGAINST THE COMPANY AND THE COMPANY WAIVES AGAINST EXECUTIVE ALL RIGHTS UNDER
CALIFORNIA CIVIL CODE SECTION 1542 (OR ANY APPLICABLE SIMILAR PROVISION OF
FEDERAL, STATE, LOCAL OR FOREIGN LAW), WHICH PROVIDES AS FOLLOWS:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH,
IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

Executive and the Company represent that other than the Employment Dispute and
Company Materials Dispute as stated in the Recitals of this Agreement, they are
not aware of any other claims, losses, damages or injuries caused by or related
to the subject matter of the releases contained in Sections 3.a., 3.b., and 3.c.
above.  Each of the parties acknowledges that this Section 4 does not constitute
a release of, or otherwise affect, any right or obligation specifically created
or reserved by this Agreement.

5.

Acknowledgment of Payment in Full and Cancellation of Stock Options.  Executive
acknowledges that the consideration paid to Executive in this Agreement
constitutes payment in full of all compensatory obligations the Company owes to
Executive prior to the Termination Date, whether such obligations were verbal or
in writing.  In addition, Executive formally agrees and acknowledges that his
twelve million (12,000,000) stock options, whether vested or unvested, are
formally cancelled by the Company in full, as well as any promises, binding or
otherwise, to any additional stock grant to Executive beyond that which is set
forth in Section1.d. above.

 

 

6.

Outstanding Company Obligations.  The Company acknowledges that Executive signed
personal guarantees on behalf of the Company, including, but not limited to the
vendors Arett Sales Corporation, Airgas, Authorize.net, Comcast Cable and
Griffin Greenhouse & Nursery Supplies.  The Company agrees that it will pay the
amounts due to vendors that Executive personally guaranteed on behalf of the
Company, provided that the Company can verify its obligation to do so (“Company
Obligations”).  The Company agrees that it will pay the presently outstanding
balance owed to Arett Sales Corporation in the amount of $8,462.32 on or before
October 22, 2014.

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7.

Indemnification.  Nothing herein shall negate, void, nullify, limit or excuse
the Company’s obligation to indemnify Executive pursuant to the terms of the
ESA, and the Company’s Articles of Incorporation and Bylaws in effect at the
time Executive served as an officer and director of the Company.

 

 

8.

Bankruptcy.  The parties agree (and the Company acknowledges Executive’s express
reliance thereon) that upon (a) the Company’s filing of a voluntary petition or
becoming the subject of an involuntary petition seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future federal, state or foreign act of law relating
to bankruptcy or insolvency, including without limitation, chapters 7 and 11 of
the United States Bankruptcy Code (collectively and each individually, a
“Bankruptcy Event”), and (b) the initiation in any such proceeding of an action
to avoid or recover the Severance Payments, Health Insurance Payments, Vacation
Payment and/or Reimbursement made to Executive under this Agreement pursuant to
the provision of chapter 5 of the Bankruptcy Code or any similar state or
foreign law, the release granted by Executive in Section 3.a.-c. shall be null
and void and Executive shall retain any and all claims and remedies that may
exist against the Company.

 

 

9.

No Mistake of Fact or Law.  In entering into this Agreement, each party
recognizes that no facts or representations are ever absolutely certain.
 Accordingly, each party assumes the risk of any mistake, and if it should
subsequently discover that any understanding of the facts or of the law was
incorrect, each party understands and expressly agrees that it shall not be
entitled to set aside this Agreement by reason thereof, regardless of any
mistake of fact or law.

 

 

10.

No Admission.  Nothing in this Agreement is to be construed as an admission of
wrongdoing or liability by any party hereto, as such wrongdoing or liability is
expressly denied, and no finding thereof has been made by any arbitrator, court
or other tribunal.  

 

 

11.

Entire Agreement.  Except as otherwise stated in this Agreement, this Agreement
constitutes the entire agreement and understanding between the parties with
respect to the settlement and compromise of the matters set forth herein.  All
prior and contemporaneous conversations, negotiations, possible and/or alleged
agreements, representations, covenants and warranties between the parties hereto
are merged herein.  This Agreement may be modified and/or amended only with the
mutual written consent of all parties.

 

 

12.

Representations and Warranties.  The parties hereby represent and warrant to
each other the following, each of which is a continuing representation and
warranty:

 

a.

Each of the parties has received, or has had the ability to obtain, independent
legal advice from attorneys of their choice with respect to the advisability of
making the agreements provided herein and with respect to the advisability of
executing this Agreement.  The parties and their respective attorneys have made
such investigation of the facts pertaining to this Agreement as they deem
necessary.

 

 

 

 

b.

Each party is entering into this Agreement freely and voluntarily, is not acting
under any misapprehension as to the effect hereof, and has acted and does hereby
act freely and voluntarily and not under any coercion or duress.

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c.

Except as otherwise expressly stated in this Agreement, the parties have not
made any statement or representation to the other regarding any facts relied
upon by them in entering into this Agreement, and each of them specifically does
not rely upon any statement, representation, or promise of the other party or
any other person in entering into this Agreement, except as expressly stated in
this Agreement.  Each party has relied upon its own investigation and analysis
of the facts and not on any statement or representation made by any other party
in choosing to enter into this Agreement and the transactions contemplated
herein.

 

 

 

 

d.

The parties have not assigned, transferred, conveyed or otherwise disposed of
(or purported to do so) any of their respective rights, claims or causes of
action relating to this Agreement.  

 

 

 

 

e.

Each party represents and warrants that it has the full capacity and authority
to enter into, execute, deliver, and perform this Agreement and that this
Agreement constitutes an agreement binding upon and enforceable against that
party.  Each person who executes this Agreement on behalf of a corporation,
partnership, joint venture, unincorporated association, or any other entity
represents and warrants that he or she has the authority of the shareholders,
partners or members of said entity to do so.

13.

Review and Revocability.  Executive acknowledges that he has up to twenty-one
(21) days to review this Agreement before signing it, although he may
voluntarily sign it earlier.  After signing this Agreement, Executive shall have
up to seven (7) days to revoke this Agreement by written notice to the Company.
 If this Agreement is revoked, Executive shall return any and all Severance
Payments and Health Insurance Payments to Company.  In the event of breach of
this Agreement by Executive, the Company shall have the right to recoup any and
all Severance Payments and Health Insurance Payments, as well as its attorneys’
fees and costs incurred in any efforts by the Company to enforce the terms of
this Agreement, as set forth in Section 17, below.

 

 

14.

Company Equipment, Files, and Information.  Executive agrees to return to the
Company all Company-owned equipment, materials, Confidential Information as that
term is defined in the ESA, and any other property, including without limitation
the Company Materials, within seven (7) days after the execution of this
Agreement.

 

 

15.

Non-Disparagement.  The parties hereby agree and warrant that they will not
(directly or indirectly) make any false, disparaging, defamatory or detrimental
oral or written statements or comments regarding the other party or the party’s
agents, except as necessary in responding to legal process, such as court
orders, subpoenas and discovery requests.

 

 

16.

Costs.  Unless expressly set forth herein, the parties agree that each party
will bear its own costs and attorneys’ fees with respect to this matter,
including the costs and fees associated with the preparation and execution of
this Agreement.

 

 

17.

Subsequent Attorneys’ Fees and Costs.  In the event any action, motion or other
proceeding is brought for interpretation or enforcement of this Agreement, or
related to or arising out of this Agreement, the prevailing party shall be
entitled to all reasonable attorneys’ fees, costs and expenses actually incurred
in connection therewith, in addition to any other relief to which it or he may
be entitled.

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18.

Choice of Law.  This Agreement, including any rights, remedies or obligations
provided for thereunder, shall be governed by, construed and enforced in
accordance with the laws of the State of California, without regard to choice of
law principles.

 

 

19.

Severability.  Any provision of this Agreement that is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability only, without invalidating the remaining provisions hereof.  

 

 

20.

Further Assurances.  The parties agree to execute and deliver such other
instruments and perform such acts as may be appropriate or reasonably necessary,
from time to time, to effectuate the agreements and understandings of the
parties, whether the same occur before or after the date of this Agreement.

 

 

21.

Counterparts.  This Agreement may be executed and delivered in any number of
counterparts, each of which, when executed and delivered, shall be deemed an
original, and all of which together shall constitute the same Agreement.  This
Agreement may also be delivered by facsimile or email, and if so delivered, may
be relied upon for all purposes as originals.

 

 

22.

Interpretation.  This Agreement is the product of negotiations of the parties,
and in the enforcement or interpretation hereof, is to be interpreted in a
neutral manner, and any presumption with regard to interpretation for or against
any party by reason of that party having drafted or caused to be drafted this
Agreement, or any portion hereof, shall not be effective in regard to the
interpretation hereof.

 

 

23.

Headings.  The headings of all sections of this Agreement are inserted solely
for the convenience of reference and are not a part of and are not intended to
govern, limit, or aid in the construction or interpretation of any term or
provision hereof.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date last set forth below.

DATED:  October 15, 2014

EXECUTIVE

By: /s/ Robert Hunt

Robert E. Hunt

 

 

DATED:  October 13, 2014

GROWLIFE, INC.

By: /s/ Marco Hegyi

Marco E. Hegyi, President

APPROVED AS TO FORM AND CONTENT

DATED:  October 16, 2014

FINLAYSON TOFFER ROOSEVELT & LILLY LLP

By: /s/ Lindsay A. Aragón

Lindsay A. Aragón

Attorneys for Executive

ROBERT E. HUNT

 

 

DATED:  October 17, 2014

SMITH & HENNESSEY PLLC

By: /s/ Julia Doyle

Julia K. Doyle

Attorneys for Company

GROWLIFE, INC.

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