Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is made as of March 23, 2015, by and among CannLabs, Inc., a Nevada corporation (the “Employer”), and Scott McPherson (the “Executive”).

 

RECITALS

WHEREAS, the Employer considers it essential and in the best interest of the stockholders to foster the employment of key management personnel and desires to engage the services of the Executive on the terms and conditions hereinafter set forth; and

 

WHEREAS, Executive desires to render services to the Employer on the terms and conditions provided in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound hereby, agree as follows:

 

The parties, intending to be legally bound, agree as follows:

 

1.             DEFINITIONS

 

For the purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1:

 

“Agreement” means this Employment Agreement, as amended from time to time.

 

“Basic Compensation” shall include all items of base and bonus compensation, benefits and signing benefits provided for in Section 3.1 of this Agreement.

 

“Benefits” is defined in Section 3.1(c).

 

“Board of Directors” means the board of directors of Employer.

 

   “Change of Control” shall mean (i) the closing of the sale, transfer or other disposition of all or substantially all of the Employer’s assets, (ii) the consummation of the merger or consolidation of the Employer with or into another entity (except a merger or consolidation in which the holders of capital stock of the Employer immediately prior to such merger or consolidation continue to hold not less than fifty percent (50%) of the voting power of the capital stock of the Employer or the surviving or acquiring entity immediately following such merger or consolidation), or (iii) a liquidation, dissolution or winding up of the Employer; provided, however, that a transaction shall not constitute a Change of Control if its sole purpose is to change the state of the Employer’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Employer’s securities immediately prior to such transaction.

 

    	  

    	 

    
 

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Disability” shall mean once the Executive is unable for the “Disability Period” (as hereafter defined) to perform the essential functions of the Executive’s duties with reasonable accommodation.  The disability of the Executive will be determined by a medical doctor selected by written agreement of the Employer and the Executive upon the request of either party by notice to the other.  If the Employer and the Executive cannot agree on the selection of a medical doctor, each of them will select a medical doctor and the two medical doctors will attempt to make a determination of disability.  If they cannot agree, they will select a third medical doctor who will determine whether the Executive has a disability.  The determination of the third medical doctor selected under this provision will be binding on both parties.  The Executive must submit to a reasonable number of examinations by the medical doctor making the determination of disability under this provision, and the Executive hereby authorizes the disclosure and release to the Employer of such determination and all supporting medical records.  If the Executive is not legally competent, the Executive’s legal guardian or duly authorized attorney-in-fact will act in the Executive’s stead for the purposes of submitting the Executive to the examinations, and providing the authorization of disclosure, required under this provision.

 

“Disability Period” shall mean 180 consecutive days or such lesser number of days as elapse until disability insurance benefits commence under any disability insurance coverage furnished by Employer to Executive, if any.

 

“Effective Date” means June 11, 2014.

 

“Employment Period” means the term of the Executive’s employment under this Agreement as defined in Section 2.2.

 

“For Cause” shall mean:  (a) the Executive’s conviction of or plea of guilty to a crime that constitutes a felony only if such felony materially impairs the Executive’s ability to perform services for the Employer; (b) a breach of fiduciary duty for personal profit; (c) fraud, dishonesty or other acts of willful misconduct in the rendering of services on behalf of the Employer or relating to the Executive’s employment; (d) willful misconduct by the Executive which would cause the Employer to violate any state or federal law relating to sexual harassment or age, sex or other prohibited discrimination or any violation of written policy of the Employer or any successor entity adopted in respect to such law; (e) failure to follow the lawful instructions of the Board of Directors of the Employer, provided compliance with such directive was reasonably within the scope of the Executive’s duties and the Executive was given written notice that his or her conduct could give rise to termination and such conduct is not, or could not be cured;  or (f) any violation by the Executive of the terms of this Agreement;  provided, however, that in order to terminate Executive For Cause, Employer must first provide Executive with thirty (30) days written notice of the particular For Cause events alleged by Employer; however, in the event of a For Cause event specified at sub-sections (e) and (f) above, the thirty (30) day notice period must be accompanied with a right to cure within such thirty (30) day period.

 

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“Good Reason” shall mean, unless Executive shall have consented in writing thereto, any of the following: (i) a reduction in Executive’s title, duties, responsibilities or status which are inconsistent with Executive’s position with Employer; (ii) the assignment to Executive of duties inconsistent with the duties normally assigned to Persons in offices of similar position to that of Executive; (iii) a reduction by Employer in Executive’s Basic Compensation; (iv) relocation of the Executive’s principal place of employment by more than 10 miles; (v) the Employer’s failure to obtain an agreement from any successor to the Employer to assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform if no succession had taken place, except where such assumption occurs by operation of law; or (vi) the breach by Employer of any agreement or obligation under this Agreement after notice and a thirty (30) day right to cure.

 

“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or governmental body.

 

2.             EMPLOYMENT TERMS AND DUTIES

 

2.1           EMPLOYMENT

 

Commencing on the Effective Date, the Employer agrees to employ the Executive for the term of this Agreement upon the terms and conditions set forth in this Agreement, and the Executive agrees to commence employment for Employer also upon the terms and conditions set forth in this Agreement.

 

2.2           TERM

 

Subject to the provisions of Section 6, the Employment Period for the Executive’s employment under this Agreement will be three (3) years, beginning on the Effective Date, and shall be automatically renewed for consecutive one-year renewal terms thereafter, unless, not less than sixty (60) days prior to the end of the original term or any renewal term, either party gives the other party written notice of termination of employment which termination shall be effective as of the end of such original term or renewal term.

 

2.3           DUTIES

 

The Executive will serve as Chief Financial Officer of Employer and will perform all duties required in furtherance of his position, including without limitation, all such duties as are customarily associated with such position or such duties as are assigned or delegated to the Executive by the Board of Directors.  The Executive agrees to perform in good faith and to the best of his ability all services which may be required of him hereunder and will devote at least 50% of his efforts and business time, skill, attention and energies as are reasonably necessary to perform his duties and responsibilities under this Agreement and to promote the success of the Employer’s business.

 

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3.             COMPENSATION

 

3.1           BASIC COMPENSATION

 

(a)  Base Salary.  The Executive will be paid an initial annual base salary of $120,000, subject to further adjustment as provided below (the “Base Salary”), which will be payable in equal periodic installments according to the Employer’s customary payroll practices, but no less frequently than monthly.  The Executive’s Base Salary will be reviewed by Employer’s Board of Directors not less frequently than annually, and may be adjusted by Employer but in no event will be less than $120,000 per year.

 

(b)           Bonus.  Executive shall be eligible to receive annual bonus compensation at the discretion of Employer’s Board of Directors and in accordance with Employer’s executive bonus or incentive compensation plan that may be in effect from time to time. In addition, Executive will be eligible to participate in an annual incentive plan which will provide an incentive payment based upon achievement of agreed upon performance goals. The Compensation Committee of Employer will determine the goals to be measured against as well as the target incentive (the “Target Incentive”), expressed as a percentage of base salary, to be up to 50% of Base Salary, and in no event less than 25% of Base Salary (“Annual Bonus”) provided that the Company has positive cash flow not to include cash flows from financing, as defined and in accordance with generally accepted accounting principles. In the event that the Executive is employed for a partial year, he shall be entitled to such Annual Bonus as declared by the Compensation Committee or as set forth in an incentive plan adopted by the Compensation Committee or Board of Directors, on a prorata basis for that period of the year for which he was employed.  The Annual Bonus will be paid within two and a half (2 1/2) months after the end of the applicable calendar year.

 

(c)        Restricted Stock Grant.  In addition to Base Salary, as part of the Executive’s overall compensation, the Executive shall receive a restricted stock award of 300,000 shares of Employer’s common stock (the “Shares”). For so long as the Executive remains continuously employed by the Employer, the Shares shall vest as follows: 33% of the Shares shall vest on June 11, 2015, 2016, and 2017.

 

 (d)          Benefits.

 

(i)           General Benefits.  The Executive will, during the Employment Period, be permitted to participate in such pension, profit sharing, bonus (subject to the provisions of Section 3.1 (b)), life insurance, hospitalization, major medical, and other employee benefit plans of the Employer that may be in effect from time to time, to the extent the Executive is eligible under the terms of those plans (collectively, the “Benefits”).  The Executive shall also be entitled to such other fringe benefits as are now or may become available to all of Employer’s other Executive officers.

 

(ii)           Life and Disability Insurance.  During the term of this Agreement, the Employer shall pay Executive an annual amount not to exceed $2,500 per annum (prorated for less than annual periods) to reimburse Executive for the cost of Executive securing life or disability insurance policies in an amount and to the extent Executive may select.

 

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4.             EXPENSE REIMBURSEMENT

 

The Employer will pay reasonable expenses incurred by the Executive in the performance of the Executive’s duties pursuant to this Agreement, including without limitation reasonable expenses incurred by the Executive in attending conventions, other business meetings and for promotional expenses, provided that any such activities must be related to Employer’s business.  In addition, the Employer will pay for (a) a corporate apartment in Denver, Colorado or other city where Company maintains a corporate office and the expenses incurred therewith, including but not limited to electricity, cable television, water, etc. (b) a vehicle in Colorado or other state where Company maintains a corporate office (c) travel expenses from Executive’s state of residence to the Company’s corporate office (d) the costs of continuing professional education required to maintain licenses currently held by Executive (e) licensing fees required to maintain the licenses currently held by the Executive.  All individual expenses (or those aggregated for a single convention, seminar or other business trip, excluding airfare and hotel expenses) greater than $3,000 must be approved by either Employer’s Chief Financial Officer or its Board of Directors.

 

5.             VACATIONS AND HOLIDAYS

 

The Executive will be entitled to four (4) weeks paid vacation each calendar year, but in no event more than two (weeks) consecutively in accordance with the vacation policies of the Employer in effect for its Executive officers from time to time.  The Executive will also be entitled to the paid holidays and other paid leave set forth in the Employer’s policies.  Vacation days during any calendar year that are not used by the Executive by March 31st of the following calendar year shall be forfeited.

 

6.             TERMINATION

 

6.1           EVENTS OF TERMINATION

 

The Executive’s employment pursuant to this Agreement may be terminated by Employer on the following grounds:

 

(a)           upon the death of the Executive;

 

(b)           upon the Disability of the Executive immediately upon notice from either party to the other;

 

(c)           For Cause (following the expiration of any applicable notice period from Employer to Executive);

 

	
  

	
(d)

	
at the discretion of Employer other than For Cause.

 

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The Executive may terminate her employment on the following grounds:

 

(e)           without Good Reason, provided that Executive gives Employer at least thirty (30) days prior written notice of her termination of employment; or

 

(f)           for Good Reason (following the expiration of any applicable notice period from Executive to Employer).

 

6.2           TERMINATION PAY

 

Effective upon the termination of this Agreement, the Employer will be obligated to pay the Executive (or, in the event of her death, her designated beneficiary as defined below) the compensation provided in this Section 6.2:

 

(a)           Termination by the Employer For Cause or Termination by Executive Without Good Reason. If the Employer terminates this Agreement For Cause or Executive resigns or terminates his employment for other than Good Reason, the Executive will be entitled to receive his (i) Basic Compensation only through the date such termination is effective, (ii) any current and carried-over unused vacation days, and (iii) unpaid but accrued reimbursement for travel and business expenses.  Executive will not be entitled to any accrued bonus compensation for the calendar year during which such termination occurs, however, will be entitled to retain any bonus compensation paid prior to such termination. Executive’s options or restricted stock grants will be treated, in this case, as set forth in any option or restricted stock grant agreement between Executive and Employer.

 

(b)           Termination upon Disability. If this Agreement is terminated by either party as a result of the Executive’s Disability, the Executive will be entitled to receive his (i) Basic Compensation and Benefits for twelve (12) months from the date such termination is effective, (ii) any current and carried-over unused vacation days, and (iii) unpaid but accrued reimbursement for travel and business expenses. Executive shall also be entitled to receive that part of the Executive’s accrued bonus compensation, if any, for the calendar year during which his Disability occurs, prorated through the end of the calendar quarter during which his termination is effective. If this Agreement is terminated as a result of the Executive’s Disability, Executive shall fully vest in 100% of all options and restricted stock grants which Executive received in connection with her employment by Employer, and Executive shall have the full term of such options in which to exercise any or all of them, notwithstanding any accelerated exercise period contained in any such option.

 

(c)           Termination upon Death. If this Agreement is terminated because of the Executive’s death, Employer will continue to pay Executive’s estate his (i) Basic Compensation for twelve (12) months from the date such termination is effective, (ii) any current and carried-over unused vacation days, (iii) unpaid but accrued reimbursement for travel and business expenses, and (iv) that part of the Executive’s accrued bonus compensation, if any, for the calendar year during which her death occurs, prorated through the end of the calendar quarter during which her death occurs. If this Agreement is terminated as a result of the Executive’s death, Executive shall fully vest in 100% of all options and restricted stock grants which Executive received in connection with her employment by Employer, and Executive shall have the full term of such options in which to exercise any or all of them, notwithstanding any accelerated exercise period contained in any such option.

 

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                        (d)            Termination by Executive For Good Reason or Termination by Employer Without Cause. If this Agreement is terminated by Executive for Good Reason, or if this Agreement is terminated by Employer other than For Cause then Employer shall pay to Executive (i) Base Salary and Benefits for a period of twelve (12) months, (ii) unpaid but accrued reimbursement for travel and business expenses, and (iii) that part of the Executive’s accrued bonus compensation, if any, for the calendar year during which termination under this Section 6(d) occurs.  All options and restricted stock grants in Employer which Executive received in connection with her employment by Employer shall immediately vest and Executive shall have the full term of such options in which to exercise any or all of them, notwithstanding any accelerated exercise period contained in any such option.

 

(e)            Acceleration of Vesting. If this Agreement is terminated by Employer other than for Cause within initial six (6) months of Term, 50,000 Shares shall automatically vest.  If this Agreement is terminated by Employer without cause after first 6 months of the Term, an additional 8,333 Shares shall vest for each month of service beyond initial 6 months of Term. If terminated upon a Change of Control, vesting of all Shares shall immediately accelerate.

 

7.             SECTION 409A.

 

(a)           This Agreement is intended to comply with the requirements of Code Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Payments of Non-Qualified Deferred Compensation (as such term is defined under Code Section 409A and the regulations promulgated thereunder) may only be made under this Agreement upon an event and in a manner permitted by Code Section 409A. Any amounts payable solely on account of an involuntary separation from service of Executive within the meaning of Code Section 409A shall be excludible from the requirements of Code Section 409A, either as involuntary separation pay or as short-term deferral amounts, to the maximum possible extent. For purposes of Code Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with Code Section 409A including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in this Agreement, (ii) the amount of expenses available for reimbursement, or the in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense in incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

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(b)           To the extent required by Code Section 409A, and notwithstanding any other provision of this Agreement to the contrary, no payment of Non-Qualified Deferred Compensation will be provided to, or with respect to, the Executive on account of her separation from service until the first to occur of (i) the date of Executive’s death or (ii) the date which is one day after the six (6) month anniversary of her separation from service, and in either case only if she is a “specified employee” (as defined under Code Section 409A(a)(2)(B)(i) of the Code and the regulations promulgated thereunder) in the year of his separation from service.  Any payment that is delayed pursuant to the provisions of the immediately preceding sentence shall instead be paid in a lump sum (subject to all applicable withholding) promptly following the first to occur of the two dates specified in such immediately preceding sentence.

 

(c)           Any payment of Non-Qualified Deferred Compensation made under Section 4 pursuant to a voluntary or involuntary termination of Executive’s employment with the Employer shall be withheld until Executive incurs both (i) a termination of his employment relationship with the Employer and (ii) the first instance of a “separation from service” with the Employer, as such term is defined in Treas. Reg. Section 1.409A-1(h).

 

(d)           The preceding provisions of this Section 7 shall not be construed as a guarantee by the Employer of any particular tax effect to Executive under this Agreement, under any plan or program sponsored or maintained by the Employer or under any other agreement by and between Executive and the Employer. The Employer shall not be liable to Executive for any additional tax, penalty or interest imposed under Code Section 409A nor for reporting in good faith any payment made under this Agreement or under any such other plan, program or agreement as an amount includible in gross income under Code Section 409A.

 

8.           CHARACTER OF TERMINATION PAYMENTS; MITIGATION

 

The amounts payable to Executive upon any termination of this Agreement shall be considered severance pay in consideration of past services rendered on behalf of the Employer and his continued service from the date hereof to the date he becomes entitled to such payments.  Executive shall have no duty to mitigate his damages by seeking other employment and, should Executive actually receive compensation from any such other employment, the payments required hereunder shall not be reduced or offset by any such other compensation.

 

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9.

	
CONFIDENTIALITY AND RELATED MATTERS.

 

9.1           NON-DISCLOSURE COVENANT

 

Employer and the Executive acknowledge that the services to be performed by the Executive under this Agreement are unique and valuable and that, as a result of the Executive’s employment, the Executive will be in a relationship of confidence and trust with Employer and will come into possession of “Confidential Information” (i) owned or controlled by Employer and its subsidiaries and affiliates; (ii) in the possession of Employer and its subsidiaries and affiliates and belonging to third parties; or (iii) conceived, originated, discovered or developed, in whole or in part, by the Executive during the term of this Agreement and relating to his duties for the Employer under this Agreement.  As used herein “Confidential Information” means trade secrets and other confidential or proprietary business, technical, personnel or financial information of Employer, whether or not the Executive’s work product, is written, graphic, oral or other tangible or intangible forms, including but not limited to specifications, samples, records, data, computer programs, drawings, diagrams, models, consumer names, ID’s or e-mail addresses, business or marketing plans, studies, analyses, projections and reports, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and software systems and processes that are not readily available to the public, even if it is not specifically marked as a trade secret or confidential, unless Employer advises the Executive otherwise in writing or unless the information has been shared by Employer with entities not bound by non-disclosure agreements.  In consideration of the compensation and benefits to be paid or provided to the Executive by the Employer under this Agreement, the Executive agrees not to directly or indirectly use or disclose to anyone, either during the Employment Period or after the termination of this Agreement, except in the performance of his duties of his employment with Employer or with Employer’s prior written consent, any Confidential Information of Employer.  This non-disclosure covenant does not apply to information that is disclosed or becomes public through another source that is not bound by a confidentiality agreement with Employer; which Executive is required to disclose pursuant to court order, subpoena or applicable law (provided that Executive will use reasonable efforts to provide Employer with prompt notice of any such requests or requirement so that Employer may seek an appropriate protective order); or which is disclosed in any proceeding to enforce or interpret this Agreement.  The Executive agrees that in the event of the termination of the Executive’s employment for any reason, the Executive will deliver to Employer, upon request, all property belonging to Employer, including all documents and materials of any nature pertaining to the Executive’s work with Employer and will not take with him any documents or materials of any description, or any reproduction thereof of any description, containing or pertaining to any Confidential Information.

 

	
  

	
9.2

	
WORK MADE FOR HIRE

 

Executive recognizes and understands that Executive’s duties at the Employer may include the preparation of materials, including without limitation written or graphic materials, and that any such materials conceived or written by Executive shall be done as “work made for hire” as defined and used in the Copyright Act of 1976, 17 U.S.C. §§ 1 et seq.  In the event of publication of such materials, Executive understands that since the work is a “work made for hire”, the Employer will solely retain and own all rights in said materials, including right of copyright.

 

 

	
  

	
9.3

	
DISCLOSURE OF WORKS AND INVENTIONS/ASSIGNMENT OF PATENTS

 

In consideration of the promises set forth herein, Executive agrees to disclose promptly to the Employer, or to such person whom the Employer may expressly designate for this specific purpose (its “Designee”), any and all works, inventions, discoveries and improvements authored, conceived or made by Executive during the period of employment and related to the business or activities of the Employer, and Executive hereby assigns and agrees to assign all of Executive’s interest in the foregoing to the Employer or to its Designee.  Executive agrees that, whenever he is requested to do so by the Employer, Executive shall execute any and all applications, assignments or other instruments which the Employer shall deem necessary to apply for and obtain Letters Patent or Copyrights of the United States or any foreign country or to otherwise protect the Employer’s interest therein.  Such obligations shall continue beyond the termination or nonrenewal of Executive’s employment with respect to any works, inventions, discoveries and/or improvements that are authored, conceived of, or made by Executive during the period of Executive’s employment, and shall be binding upon Executive’s successors, assigns, executors, heirs, administrators or other legal representatives.

 

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10.

	
NON-COMPETITION AND NON-SOLICITATION MATTERS

 

	
  

	
10.1

	
NON-COMPETITION

 

During the term of this Agreement the Executive agrees that he shall not work for or be interested in any business within 200 miles of any facility owned by the Company which acts as an independent marijuana testing lab during his Term of employment or for twelve (12) months following Executive’s termination (the “Non-Compete Period”). For the purposes of this Agreement, the term “work for or be interested in any business” means that the Executive is a stockholder, director, officer, employee, partner or individual proprietor, with that business, but not if his interest is limited solely to the passive ownership of five percent (5%) or less of any class of the equity or debt securities of a corporation whose shares are listed for trading on a national securities exchange or traded in the over-the-counter market. In the event that any part of this Section 9 is adjudged invalid or unenforceable by any court of record, board of arbitration or judicial or quasi-judicial entity having jurisdiction thereof by reason of length of time, geographical coverage, activities covered, or for any other reason, then the invalid or unenforceable provisions of this covenant shall be deemed reformed and amended to the maximum extent permissible under applicable law and shall be enforced and enforceable as so amended in accordance with the intention of the parties as expressed herein.

 

	
  

	
10.2

	
NON-SOLICITATION

 

During the Non-Compete Period, the Executive also agrees that he will not directly or indirectly: (i) solicit the trade of, or trade with, any past, present or prospective customer of the Employer for any business purpose that directly competes with the business of Employer or a subsidiary or affiliate of Employer; or (ii) solicit or induce, or attempt to solicit or induce, any employee of Employer to leave Employer for any reason whatsoever, or assist or participate in the hiring of any employee of Employer to work for another entity.

 

11.           REPRESENTATIONS OF EXECUTIVE

 

As a material inducement to Employer to execute this Agreement and consummate the transactions contemplated thereby, the Executive hereby makes the following representations to Employer, each of which are true and correct in all material respects as of the date hereof.

 

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11.1

	
QUESTIONNAIRE

 

 On or before the date hereof Executive has completed and returned to Employer a Directors and Officers Questionnaire (the “Questionnaire”) which is true and correct in all material respects.

 

	
  

	
11.2

	
NO PRIOR AGREEMENTS

 

Executive represents and warrants that Executive is not a party to or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect Executive’s ability to perform her obligations hereunder, including without limitation any contract, agreement or understanding containing terms and provisions similar in any manner to those contained in Sections 9 and 10 of this Agreement.  Executive further represents and warrants that his employment with the Employer will not under any circumstances require him to disclose or use any confidential information belonging to prior Employers or other persons or entities, or to engage in any conduct which may potentially interfere with the contractual, statutory or common-law rights of such other Employers, persons or entities.  In the event that Executive knows or learns of any facts whatsoever which suggest that such interference might arguably occur as the result of any proposed actions by either Executive or the Employer, Executive expressly promises that he will immediately bring such facts to the Employer’s attention.

 

	
  

	
11.3

	
REVIEW BY COUNSEL

 

 Executive expressly acknowledges and represents that Executive has been given a full and fair opportunity to review this Agreement with an attorney of Executive’s choice, and that Executive has satisfied himself, with or without consulting with counsel, that the terms and provisions of this Agreement, specifically including, but not limited to, the restrictive covenant and related provisions of Section 10 hereof, are reasonable and enforceable.

 

	
  

	
11.4

	
NO CONFLICTS OF INTEREST

 

 Executive covenants that, as of the date hereof, he is not involved in any venture or activity that could compete with Employer or which could potentially interfere with his ability to perform under this Agreement.  During the Term, he will disclose to the Employer, in writing, any and all interests he may have, whether for profit or compensation or not, in any venture or activity which could potentially interfere with his ability to perform under this Agreement or create a conflict of interest for him with the Employer, other than McPherson, CPA, PLLC, which is a public accounting firm owned and operated by the employee and which has been previously disclosed to the employer.  For purposes of this Section 11.4 only, “conflict of interest” shall mean ownership of greater than one percent (1%) of, or $25,000 worth of equity in, another company which conducts business similar to that undertaken by the Employer.

 

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11.5

	
EXECUTIVE’S ABILITY

	 	 	 

 Executive represents that Executive’s experience and capabilities, and the limited provisions of Section 10, are such that he will not be prevented from earning his livelihood in businesses similar to that of Employer.  Executive acknowledges that there are a significant number of businesses for which his qualifications and experience would render him qualified for employment that do not constitute a competing businesses such that his ability to become employed after the termination or nonrenewal of this Agreement would not be impaired.

 

	
  

	
12.

	
CHANGE OF CONTROL

 

In the event of a change of control, all unvested shares and/or options will

vest immediately.

 

13.           GENERAL PROVISIONS

 

13.1         INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

 

The Executive acknowledges that the injury that would be suffered by the Employer as a result of a breach of the provisions of any provision of Sections 9 and 10 of this Agreement would be irreparable and that an award of monetary damages to the Employer for such a breach would be an inadequate remedy.  Consequently Employer will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provisions of Sections 9 and 10 of this Agreement.

 

13.2         WAIVER

 

The rights and remedies of the parties to this Agreement are cumulative and not alternative.  Neither the failure nor any delay by either party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.

 

13.3         INTENTIONALLY OMITTED.

 

13.4         EMPLOYER VIOLATION NOT A DEFENSE

 

In an action by the Employer to enforce paragraphs 9 or 10 of this Agreement, any claims asserted by Executive against the Employer shall not constitute a defense to the Employer’s action.

 

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13.5         INDEMNIFICATION

 

Employer shall indemnify and defend Executive and his heirs, executors and administrators against any costs or expense (including reasonable attorneys’ fees and amounts paid in settlement, if such settlement is approved by the Employer), fine, penalty, judgment and liability reasonable incurred by or imposed upon Executive in connection with any action, suit or proceeding, civil or criminal, to which Executive may be made a party or with which Executive shall be threatened, by reason of Executive’s being or having been an officer or director, unless with respect to such matter Executive shall have been adjudicated in any proceeding not to have acted in good faith or in the reasonable belief that the action was in the best interests of the Employer, or unless such indemnification is precluded by law, public policy.

 

13.6          NOTICES

 

All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand, (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):

	 	 	 
	 	If to Employer: 	
CannLabs, Inc.

3888 E. Mexico Ave., Suite B50

Denver, CO 80210

Telephone No.:   303.309.0105

Facsimile No.:

Attn:  President

	 	 	 
	 	If to Executive: 	
Scott A. McPherson

 

13.7         ENTIRE AGREEMENT; AMENDMENTS

 

This Agreement and the documents referenced herein, contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by the parties hereto.

 

13.8         GOVERNING LAW

 

This Agreement will be governed by the laws of the State of Nevada without regard to conflicts of laws principles.

 

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13.9           ARBITRATION, OTHER DISPUTES.

 

In the event of any dispute or controversy arising under or in connection with this Agreement, the parties shall first promptly try in good faith to settle such dispute or controversy by mediation under the applicable rules of the American Arbitration Association before resorting to arbitration.  In the event such dispute or controversy remains unresolved in whole or in part for a period of thirty (30) days after it arises, the parties will settle any remaining dispute or controversy exclusively by arbitration in Las Vegas, Nevada in accordance with the commercial arbitration rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.  All administration fees and arbitration fees shall be paid solely by Employer.  Notwithstanding the above, Employer shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of section 9 or 10 hereof.  The prevailing party shall be awarded attorneys’ fees in any dispute or controversy arising under or in connection with this Agreement.

 

13.10       ASSIGNABILITY, BINDING NATURE

 

This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs (in the case of the Executive) and assigns.  No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law.

 

13.11       SURVIVAL

 

The respective rights and obligations of the parties hereunder shall survive any termination of the Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

 

13.12       SECTION HEADINGS, CONSTRUCTION

 

The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation.  All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require.  Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.

 

13.13       SEVERABILITY

 

If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

    	14

    	 

    
 

 

13.14       COUNTERPARTS

 

This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.  This Agreement (and all other agreements, documents, instruments and certificates executed and/or delivered in connection herewith) may be executed by facsimile signatures, each of which shall be deemed an original copy of this Agreement (or other such agreement, document, instrument and certificate).

 

IMPORTANT NOTICE:  THIS AGREEMENT RESTRICTS EXECUTIVE’S RIGHTS TO OBTAIN OTHER EMPLOYMENT FOLLOWING HER EMPLOYMENT WITH THE EMPLOYER.  BY SIGNING IT, EXECUTIVE ACKNOWLEDGES THIS FACT, AND FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY THE EMPLOYER TO READ THE AGREEMENT CAREFULLY, AND/OR TO CONSULT WITH COUNSEL OF HER CHOICE CONCERNING THE LEGAL EFFECTS OF SIGNING THE AGREEMENT, PRIOR TO SIGNING IT.

 

    	15

    	 

    
 

 

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.

	 	 	 	 	 
	
WITNESS:

	 	
EMPLOYER:

	 
	 	 	 	 
	 	 	CANNLABS, INC.	 
	 	 	 	 
	Signature	 	 	 
	
 

	 	
By: 

	/s/ Mark Mirken	 
	Print Name	 	 	Authorized Executive Officer	 
	 	 	 	 	 
	Address	 	 	 	 
	 	 	 	 	 
	
Address

	 	 	 	 
	 	 	EMPLOYEE:	 
	 	 	 	 
	 	 	/s/ Scott McPherson	 
	 	 	
Scott A. McPherson

	 

 

    	16ex10_1.htm

Exhibit 10.1

 

SIXTH AMENDMENT TO FORBEARANCE AGREEMENT

 

THIS SIXTH AMENDMENT TO FORBEARANCE AGREEMENT (“Sixth Amendment”) is made and entered into as of the 18th day of March, 2015 (the “Effective Date”), by and between Sefton Resources, Inc., a British Virgin Islands corporation (“Sefton”), TEG Oil & Gas U.S.A., Inc., a Colorado corporation (“TEG”) and/or TEG MidContinent, Inc., a Colorado corporation (“TEGMC,” and together with Sefton and TEG, “Borrowers”), Hawker Energy, Inc., a Nevada corporation (“Hawker”), and Bank of the West, a California corporation (“BOTW”), with reference to the Forbearance Agreement dated April 30, 2014, as amended by the First Amendment to Forbearance Agreement (“First Amendment”) dated June 2, 2014, the Second Amendment to Forbearance Agreement (“Second Amendment”) dated June 30, 2014 , the Third Amendment to Forbearance Agreement (“Third Amendment”) dated October 31, 2014, the Fourth Amendment to Forbearance Agreement (“Fourth Amendment”) dated November 20, 2014, and the Fifth Amendment to Forbearance Agreement dated January 1, 2015 (collectively, the “Agreement”).

 

RECITALS:

 

A.          The Agreement relates to the Loan made by BOTW to Borrowers.

 

B.           Borrowers previously requested that BOTW extend the date on which the Forbearance Period ends from June 2, 2014 to December 29, 2014.

 

C.           BOTW agreed to Borrowers’ request, subject to the terms and conditions set forth in the First Amendment and the Second Amendment.

 

D.           The Second Amendment provides that Borrowers shall make monthly principal payments of $120,000.00 plus interest at the current default interest rate of 8.25% payable on the last business day of each month commencing on July 31, 2014 and continuing for the months of August, September, October and Novembers, 2014 until December 29, 2014, at which time all amounts due BOTW under the Loan Documents shall be due and payable.

 

E.           Borrowers subsequently advised BOTW that they did not have the funds necessary to make the monthly principal payment of $120,000 plus interest of $26,740.21 which was due October 31, 2014 for a total payment due of $146,740.21 (the “October Payment”) and requested that a significant portion of that October Payment be deferred.

 

F.           BOTW agreed to Borrowers’ request, subject to the terms and conditions set forth in the Third Amendment.

 

G.           The Third Amendment provides, in part, that on or before 2:00 p.m. Pacific Daylight Time on October 31, 2014 Borrowers shall pay to BOTW $50,000.00 which shall be applied against the October Payment due from Borrowers on October 31, 2014 in the BOTW’s sole and absolute discretion.  The Third Amendment further provides, in part, that on or before 2:00 p.m. Pacific Standard Time on November 20, 2014, Borrowers will pay BOTW the balance due for the October Payment (the “October Balance Payment”). The payment of $50,000 was timely received.

 

  

-1-

  

 

H.           Borrowers subsequently advised BOTW that they did not have the funds necessary to make the October Balance Payment and requested that BOTW agree that Borrower defer the deadlines to make the October Balance Payment on November 20, 2014 and the payment of $120,000 plus accrued interest due on November 28, 2014 and such payments will be included in the Loan Payoff Payment scheduled to occur on or before December 1, 2014. BOTW agreed to this payment schedule in the Fourth Amendment.

 

I.           Borrowers subsequently advised BOTW that they did not have the funds necessary to make the payments due December 1, 2014 and/or the funds needed to pay the loan in full as required by the Fourth Amendment.

 

J.           Borrowers and Hawker, the parent of Tapia Holdings, LLC (“Tapia”) subsequently jointly advised BOTW that the decrease in the price of oil worldwide has interfered in Hawker’s ability to raise the funding necessary to enable them to complete the funding for the purchase of the assets of TEG, that TEG was without sufficient operating funds to stay in operation without immediate additional funding and Hawker was willing to lend certain additional funds to TEG to enable that company to maintain operations for the immediate near future.

 

K.          Borrowers and Hawker subsequently further advised BOTW that as a condition to providing additional funding, the outstanding loans from Tapia to TEG evidenced by a Secured Subordinated Note due December 29, 2014 in the original principal amount of $1,500,000 which is fully subordinated to the rights of BOTW pursuant to the Intercreditor Agreement will be assigned to Hawker along with 100% of the stock of TEG.

 

L.           The Fifth Amendment addressed I, J and K above.

 

M.          On January 1, 2015, Tapia, Hawker, TEG, Sefton and TEGMC entered into an Amended and Restated Subordination and Intercreditor Agreement (“Intercreditor Agreemnent”) which further confirmed that additional advances and any future advances made by Hawker to TEG along with any obligations owed by TEG to Tapia which were then being assigned by Tapia to Hawker would be fully subordinated to the rights of BOTW as provided in the Intercreditor Agreement.

 

N.          As of the Effective Date, the principal owing under the Loan and pursuant to the Fifth Amendment is Four Million Eight Thousand Eighty Three and 99/100 Dollars  ($4,008,083.99) (“New Principal”) together with unpaid interest as provided in the Fifth Amendment from March 1, 2015, and unreimbursed legal fees from January 1, 2015.

 

O.           Sefton and TEGMC have requested that BOTW release them from any further liability for the Obligations as Borrowers, and BOTW, Borrowers and Hawker have discussed the terms under which BOTW would be willing to so release Sefton and TEGMC.

 

P.           Hawker has received copies of the Agreement, including all amendments thereto identified in the opening paragraph of this Sixth Amendment.

 

Q.          BOTW has agreed to release Sefton and TEGMC as Borrowers subject to the terms and conditions set forth below.

 

  

-2-

  

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the above premises, the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

1.           Definitions.  Unless otherwise indicated, words and terms which are defined in the Agreement shall have the same meaning as used herein.

 

2.           Incorporation of Recitals. The Recitals of this Sixth Amendment are incorporated herein by this reference as though fully set forth herein.

 

3.           Release of Sefton and TEGMC as Borrowers.  Subject to and effective upon the timely satisfaction of all of the following:  (a) receipt by BOTW of $400,000 in good funds by no later than March 23, 2015, to be applied to against the Obligations in acordance with the Loan Documents , and (b) the execution and delivery to BOTW of a Collateral Assignment of Note, in form and substance acceptable to BOTW (the “Collateral Assignment”), executed by Sefton in favor of BOTW and acknowledged and agreed to by Hawker, collaterally assigning to BOTW, to secure all Obligations, that certain Promissory Note dated March 18, 2015 in the principal amount of $400,000 by Hawker in favor of Sefton (as amended or replaced from time to time, the “Hawker Note”), and (c) delivery to BOTW of the original Hawker Note, together with an allonge by Sefton endorsing the same in blank to BOTW (“Allonge”), BOTW hereby releases Sefton and TEGMC from any further liability for the Obligations, except for indemnification obligations that survive the termination thereof, and the term “Borrowers” shall hereafter not include Sefton or TEGMC.  Upon repayment in full and in cash of the Obligations to BOTW, Sefton and Hawker hereby agree that to the extent that BOTW has not foreclosed upon the Hawker Note, the original Hawker Note, together with any endorsements thereto delivered to BOTW, shall be returned to Hawker and the Collateral Assignment shall be terminated.

 

4.           Conditions to Effectiveness.  This Sixth Amendment shall not be effective unless and until all of the following conditions have been timely complied with to the satisfaction of BOTW:

 

  (a)           Receipt by BOTW of a fully-executed original of this Sixth Amendment;

 

  (b)           Receipt by BOTW of $400,000 in immediately available funds by no later than March 23, 2015, to be applied pursuant to the Loan Documents;

 

  (c)           Receipt by BOTW of a fully-executed original of the Collateral Assignment, the Hawker Note, the Allonge and all other Assigned Documents, as defined in the Collateral Assignment;

 

  (d)           Receipt by BOTW of $15,000 as an advance reimbursement for estimated legal fees incurred by it since January 1, 2015, in connection with the negotiation, preparation and delivery of the above; and

 

  (e)           Receipt by BOTW of written confirmation from Hawker that the additional conditions set forth in Section 5 below have been satisfied.

 

  

-3-

  

 

5.           Additional Conditions to Effectiveness.  This Sixth Amendment shall not be effective unless and until Hawker has received the following:

 

  (a)           The original of the Warrant dated February 1, 2015 issued by Hawker to Sefton, endorsed by Sefton for cancellation; and

 

  (b)           An original stock certificate representing 1,500,000 shares of Hawker common stock issued by Hawker to Sefton, endorsed by Sefton for cancellation.

 

6.           Reaffirmation of Provisions in Agreement.  Borrowers and Hawker ratify and reaffirm that all representations, warranties and statements made in the Agreement and the Intercreditor Agreement remain true as of the Effective Date of this Sixth Amendment and are deemed reaffirmed as of the date of this Sixth Amendment.

 

7.           Reaffirmation of Releases.  Borrowers ratify and reaffirm all releases contained in the Agreement as of the date of this Sixth Amendment and such releases are deemed effective as of the Effective Date of this Sixth Amendment.  Hawker hereby joins in and reaffirms the releases in favor of BOTW which are set forth in paragraphs 1(e) and 1(f) of the Forbearance Agreement dated as of April 30, 2014, a copy of which it has received.

 

8.           Continued Validity of Agreement, Loan Documents and Intercreditor Agreement.  The Agreement, as modified hereby, the Loan Documents and the Intercreditor Agreement shall continue in full force and effect as previously constituted and are ratified and affirmed by the parties hereto.  Each reference in the Agreement or in any other agreement or document to the Agreement shall mean the Agreement as amended hereby, unless the context otherwise requires.  This Sixth Amendment, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment and the original Forbearance Agreement shall be read as one document.  The parties herein all agree that the release of Sefton and TEGMC pursuant to the terms of this Sixth Amendment shall not in any way release, modify, amend or relieve any of the other Borrowers or Hawker of their respective obligations under the Agreement, the Loan Documents, or the Intercreditor Agreement and the first priority position of BOTW in the Collateral.

 

9.           Compliance with Loan Documents and Other Matters:  Borrowers and Hawker each represent and warrant to BOTW as follows:  (a) as of the Effective Date of this Sixth Amendment, each has complied, and is in compliance with, in all material respects, all of the terms, covenants and conditions of the Agreement, the Loan Documents and the Intercreditor Agreement (including all amendments and modifications of such documents), except for the existing defaults, (b) all financial and other information provided to BOTW by Borrowers and Hawker is true and correct, and (c) as of the Effective Date, there exists no other event of default under the Agreement, any of the Loan Documents or the Intercreditor Agreement that has not been disclosed to BOTW.

 

10.        Authorization.  Each party hereto represents to the other that the individual executing this Sixth Amendment on its behalf is the duly appointed signatory of such party and that such individual is authorized to execute this Sixth Amendment by or on behalf of such party and to take all action required by the terms of this Sixth Amendment.

 

  

-4-

  

 

11.           Captions.  Section and Paragraph headings and numbers have been set forth herein for convenience only.

 

12.           No Novation.  This Sixth Amendment is not intended to be, and shall not be construed to create, a novation or accord and satisfaction, and, except as otherwise provided herein, the Agreement and the Loan Documents as previously amended shall remain in full force and effect.

 

13.           Severability.  Each provision of this Sixth Amendment shall be severable from every other provision of this Sixth Amendment for the purpose of determining the legal enforceability of any specific provision.

 

14.           Entire Agreement.  This Sixth Amendment and the documents referred to herein or contemplated hereby, constitute the entire agreement by and between Borrowers, Hawker and BOTW with respect to the Sixth Amendment and supersede all prior and contemporaneous negotiations, communications, discussions and agreements concerning such subject matter.

 

15.           Counterparts.  This Sixth Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same agreement. This Sixth Amendment may be signed and transmitted by facsimile or electronic transmission with the same validity as if it were an ink-signed document.

[Signatures on following page]

  

-5-

  

IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment to the Agreement as of the date and year first above written.

 

	  	
BANK OF THE WEST

	  	  
	  	
By:

	/s/ Angeles Coro
	  	  	
Angeles Coro

	  	  
	  	
Its:  Vice President, Special Assets Department

	  	  
	  	  
	  	
SEFTON RESOURCES, INC.

	  	  
	  	
By:

	/s/ Daniel Levi
	  	  	
   Daniel Levi

	  	  
	  	
Its:  Director

	  	  
	  	  
	  	
TEG OIL & GAS U.S.A., INC.

	  	  
	  	
 By:

	/s/ Darren Katic
	  	  	
Darren Katic

	  	  
	  	
Its:  Corporate Secretary

	  	  
	  	  
	  	
TEG MIDCONTINENT, INC.

	  	  
	  	
By:

	/s/ Daniel Levi
	  	  	
Daniel Levi

	  	  
	  	
Its:  Corporate Secretary

	  	  
	  	  
	  	
HAWKER ENERGY, INC.

	  	  
	  	  
	  	
By:

	/s/ Darren Katic	  
	  	  	
Darren Katic

	  
	  	
Its: President

 

 

-6-

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