Document:

Crailar Technologies Inc.: Exhibit 10.38 - Filed by newsfilecorp.com

	
       ____________

       

	SENIOR EXECUTIVE
      EMPLOYMENT AGREEMENT  
	
      

 

       

       

      
Between: 

      
CRAILAR TECHNOLOGIES INC. 

And:
      

      
TED SANDERS 

       

                       
      

Crailar Technologies Inc. 
305 - 4420
      Chatterton Way, Victoria, British Columbia, Canada, V8X 5J2
      
_____________

SENIOR EXECUTIVE EMPLOYMENT
AGREEMENT 

THIS SENIOR EXECUTIVE EMPLOYMENT
AGREEMENT is made and dated as fully executed on this 16th
day of April, 2014 (the “Execution Date”), with an effective date
of March 1, 2013 (the “Effective Date”). 

BETWEEN:

  
    
      
        
          
            CRAILAR TECHNOLOGIES INC., a company incorporated
              pursuant to the laws of the Province of British Columbia, Canada, and having an
              address for delivery and notice located at 305 - 4420 Chatterton Way, Victoria,
              British Columbia, Canada, V8X 5J2 (the “Company”); 

          

        

      

    

  

OF THE FIRST PART 

AND: 

  
    
      
        
          
            TED SANDERS, businessperson, having an address
              for notice and delivery located at 22441 Canyon Crest Drive, Mission Viejo,
              California, U.S.A., 92692 (the “Executive”); 

          

        

      

    

  

OF THE SECOND PART

  
    
      
        
          
            (and the Company and the Executive being hereinafter singularly
              also referred to as a “Party” and collectively referred to as the
              “Parties” as the context so requires). 

          

        

      

    

  

                      
WHEREAS:

A.                  
The Company is a reporting company incorporated under the laws of the Province
of British Columbia, Canada, and has its common shares listed for trading on
each of the TSX Venture Exchange and the FINRA over-the-counter bulletin board
market; 

B.                  
The Executive has experience in and specializes in providing reporting and
non-reporting companies with valuable management and development services, and
the Executive is the current Chief Financial Officer of the Company; 

C.                  
The Company is a “green tech” company focused on providing
environmentally-friendly textile, composite, biomass and pulping solutions
through the cost effective process of converting industrial hemp, flax and other
bast fibre crops through its patented CRAiLAR® and CRAiLEXTM
technologies and, as a consequence thereof, the Company is hereby desirous
of formally retaining the Executive as an employee of the Company, and the
Executive is hereby desirous of accepting such position, in order to provide
such related Services (as hereinafter defined) to the Company; 

D.                  
In accordance with the terms and conditions of a certain and underlying letter
agreement, dated for reference February 22, 2013, as entered into between the
Parties (collectively, the “Underlying Agreement”), the Parties thereby
formalized the appointment of the Executive as the Chief Financial Officer, together with the
provision for certain related management and operational services to be provided
by the Executive to the Company in accordance with the terms and conditions of
the Underlying Agreement; 

- 2 - 

E.                  
Since the entering into of the Underlying Agreement, and as a consequence of the
Executive’s valuable role within the Company, the Parties hereby acknowledge and
agree that there have been various discussions, negotiations, understandings and
agreements between them relating to the terms and conditions of the Services
and, correspondingly, that it is their intention by the terms and conditions of
this “Senior Executive Employment Agreement” (the “Agreement”) to hereby
replace, in their entirety, the Underlying Agreement, together with all such
prior discussions, negotiations, understandings and agreements with respect to
the Services; and 

F.                  
The Parties have agreed to enter into this Agreement which replaces, in its
entirety, the Underlying Agreement, together with all such prior discussions,
negotiations, understandings and agreements, and, furthermore, which necessarily
clarifies their respective duties and obligations with respect to the within
Services to be provided hereunder, all in accordance with the terms and
conditions of this Agreement; 

                      
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in
consideration of the mutual covenants and provisos herein contained,
THE PARTIES AGREE AS FOLLOWS:

PART 1 
INITIAL TERM AND RENEWAL TERM

Initial Term 

1.1                  
The initial term of this Agreement (the “Initial Term”) is for a period
of five years commencing on March 1, 2013 (the “Effective Date”), unless
such employment will be terminated earlier as hereinafter provided. 

Renewal Term 

1.2                  
Subject at all times to the provisions of Part 7 herein, this Agreement shall
renew automatically if not specifically terminated in accordance with the
following provisions. The Company agrees to notify the Executive in writing at
least 90 calendar days prior to the end of the Initial Term of its intent not to
renew this Agreement (the “Company’s Notice”). Should the Company fail to
provide a Company’s Notice this Agreement shall automatically renew for an
additional five-year term renewal basis after the Initial Term (each a
“Renewal Term”) until otherwise specifically renewed in writing by each
of the Parties for the next Renewal Term or, otherwise, terminated upon delivery
by the Company of a corresponding and follow-up 90 calendar day Company’s Notice
in connection with and within 90 calendar days prior to the end of any such
Renewal Term. Any such Renewal Term shall be on the same terms and conditions
contained herein unless modified and agreed to in writing by the Parties in
advance. 

- 3 - 

PART 2 
TITLE, SERVICES, REPORTING AND
DUTIES 

Title and Services 

2.1                  
Subject as otherwise herein provided, the Company hereby confirms the prior
appointment of the Executive to the office of Chief Financial Officer of the
Company (the “CFO”), and on and after the Effective Date the Executive
will undertake and perform the duties and responsibilities normally and
reasonably associated with such office and including, without limitation, those
initial services being set out in Schedule “A” to this Agreement which forms a
material part hereof. The Executive agrees that the Executive’s duties and
responsibilities may be reasonably modified at the Company’s discretion from
time to time. All services to be provided by the Executive hereunder are
referred to as the “Services”. 

2.2                  
In this regard it is hereby acknowledged and agreed that the Executive shall be
entitled to communicate with and shall rely upon the immediate advice, direction
and instructions of the Chief Executive Officer of the Company (the
“CEO”), or upon the advice or instructions of such other director or
officer of the Company as the CEO shall, from time to time, designate in times
of the CEO’s absence, in order to initiate, coordinate and implement the
Services as contemplated herein subject, at all times, to the final direction
and supervision of the Board of Directors of the Company (the “Board of
Directors”). 

Conditions 

2.3                  
The Executive’s employment under this Agreement is conditional upon the
Executive: 

	 	(a) 	
      receiving and maintaining all required regulatory and
      governmental licences and approvals of various jurisdictions as may be
      required to act as the CFO of the Company; and

	 	 	 
	 	(b) 	
      maintaining, in good standing, all required and
      recommended professional accreditation as may be deemed necessary by the
      Company, acting reasonably in consultation with the Executive, in order
      for the Executive to fulfill all Services under this
  Agreement.

Services to Subsidiaries 

2.4                  
The Executive will perform the Services on behalf of the Company and its
subsidiaries, accordingly: 

	 	(a) 	
      in this Agreement the term “the Company” means the
      Company and all of its subsidiaries;

	 	 	 
	 	(b) 	
      the Executive may be appointed to the office of CFO
      within the Company; and

	 	 	 
	 	(c) 	
      in the course of performing the Services, the Executive
      will be required to travel.

Reporting 

2.5                  
The Executive will report to the person holding the office of CEO of the
Company. The Executive will report fully on the management, operations and
business affairs of the Company and advise, to the best of the Executive’s
ability and in accordance with reasonable business standards, on business
matters that may arise from time to time. 

- 4 - 

Duties and Obligations 

2.6                  
The Executive acknowledges that, as a senior or executive officer of the
Company, the Executive will owe a fiduciary duty to the Company. 

2.7                  
The Executive will also: 

	 	(a) 	
      devote reasonably full-time effort and attention to the
      business and affairs of the Company;

	 	 	 
	 	(b) 	
      perform the Services in a competent and efficient manner
      and in a manner consistent with the Executive’s fiduciary obligations to
      the Company as a senior or executive officer thereof and in compliance
      with all the Company policies, and will carry out all lawful instructions
      and directions from time to time given to the Executive;

	 	 	 
	 	(c) 	
      use the Executive’s best efforts to promote the interests
      and goodwill of the Company; and

	 	 	 
	 	(d) 	
      not undertake any other business or occupation or become
      a director or officer, employee or agent of any other company, firm,
      society or person without prior written approval of the Board of
      Directors.

2.8                  
The Executive acknowledges and agrees that all written and oral opinions,
reports, advice and materials provided by the Executive to the Company in
connection with the Executive’s employment and the Services hereunder are
intended solely for the Company’s benefit and for the Company’s uses only, and
that any such written and oral opinions, reports, advice and information are the
exclusive property of the Company. In this regard the Executive covenants and
agrees that the Company may utilize any such opinion, report, advice and
materials for any other purpose whatsoever and, furthermore, may reproduce,
disseminate, quote from and refer to, in whole or in part, at any time and in
any manner, any such opinion, report, advice and materials in the Company’s sole
and absolute discretion. The Executive further covenants and agrees that no
public references to the Executive or disclosure of the Executive’s role in
respect of the Company may be made by the Executive without the prior written
consent of the Board of Directors in each specific instance. 

2.9                  
The Executive warrants that the Executive shall conduct the Services and other
activities in a manner which is lawful and reputable and which brings good
repute to the Company, the Company’s business interests and the Executive. In
particular, and in this regard, the Executive specifically warrants to provide
the Services in a sound and professional manner such that the same meets
superior standards of performance quality within the standards of the industry
or as set by the specifications of the Company. In the event that the Board of
Directors has a reasonable concern that the Services as conducted by the
Executive are being conducted in a way contrary to law or is reasonably likely
to bring disrepute to the business interests or to the Company’s or the
Executive’s reputation, the Company may require that the Executive make such
alterations in the Executive’s business conduct or structure, whether of
management or Board representation or employee or associate representation, as
the Board of Directors may reasonably require in its sole and absolute
discretion. 

2.10                
The Executive will comply with all Canadian, United States and foreign laws,
whether federal, provincial or state, applicable to the Executive’s respective
duties and obligations hereunder and, in addition, hereby represents and
warrants that any information which the Executive may provide to any person or
company hereunder will, to the best of the Executive’s knowledge, information and belief, be accurate and
complete in all material respects and not misleading, and will not omit to state
any fact or information which would be material to such person or company. 

- 5 - 

PART 3 
PLACE OF EMPLOYMENT

Relocation 

3.1                  
The Executive will provide Services based in Portland, Oregon, U.S.A., but may,
at the Executive’s sole discretion, if requested by the Company, move to any
place within North America where the Company currently or may in the future
conduct business, subject to section 3.2 herein. 

3.2                  
As a result of the Executive’s determination to move to Portland, Oregon,
U.S.A., from Mission Viejo, California, U.S.A., in order to provide the Services
required hereunder, the Company will pay: 

	 	(a) 	
      all reasonable expenses, supported by original receipts,
      incurred by the Executive and the Executive’s spouse and any children, in
      moving to Portland, Oregon, U. S.A., and including, without restriction,
      all moving costs, real estate commissions, airfare and hotel accommodation
      and meals in Portland, Oregon, U. S.A., for a reasonable period after
      arriving in Portland, Oregon, U.S.A., and

	 	 	
       

	 	(b) 	
      all reasonable relocation expenses, supported by original
      receipts, incurred by the Executive and the Executive’s spouse and any
      children, in leaving Portland, Oregon, U.S.A., as a result of the
      termination of the Executive’s employment as hereinafter provided for any
      reason whatsoever except for Just Cause (as hereinafter defined)
      (collectively, the “Relocation Expenses”).

PART 4 
COMPENSATION AND BENEFITS

Base Salary 

4.1                  
It is hereby acknowledged and agreed that the Executive shall render the
Services as defined hereinabove during the Initial Term and during the
continuance of this Agreement and shall thus be compensated from the Effective
Date of this Agreement to the termination of the same by way of the payment by
the Company to the Executive, or to the further order or direction of the
Executive as the Executive may determine, in the Executive’s sole and absolute
discretion, and advise the Company of prior to such payment, of the gross
monthly fee of U.S. $18,750 (representing a gross annual fee of U.S. $225,000;
the “Base Salary”). All such Base Salary will be due and payable by the
Company to the Executive, or to the further order or direction of the Executive
as the Executive may determine, in the Executive’s sole and absolute discretion,
and advise the Company of prior to any such Base Salary payment, bi-monthly and
in a manner consistent with the general payroll practice of the Company, or at
such other time and in such other manner as the Executive and the Company may
agree, from time to time, during the continuance of this Agreement. 

- 6 - 

Increase in Base Salary 

4.2                  
The Company will review the Base Salary payable to the Executive from time to
time during the Initial Term and during the continuance of this Agreement and
may, in its sole and absolute discretion, increase the Base Salary depending on
the Executive’s performance of the Services and having regard to the financial
circumstances of the Company. 

Bonus 

4.3                  
It is hereby also acknowledged that the Board of Directors may, in good faith,
consider the payment of reasonable industry standard annual bonuses (each being
a “Bonus”) to the Executive, from time to time, based upon the
performance of the Company and upon the achievement by the Executive and/or the
Company of reasonably pre-determined and mutually agreed upon management
objectives to be reasonably established by the Board of Directors (after
reviewing proposals with respect thereto defined by the Executive and delivered
to the Board of Directors by the Executive at least 30 calendar days before the
beginning of the relevant year of the Company (or within 90 calendar days
following the commencement of the Company’s first calendar year commencing on
the Effective Date)); and which management objectives must be mutually agreed to
in advance failing which no Bonus may be payable during the ensuing year. It is
expected that these management objectives will consist of both financial and
subjective goals and shall be specified in writing by the Board of Directors,
and a copy shall be given to the Executive, prior to the commencement of the
applicable year. The payment of any such Bonus shall be payable no later than
within 120 calendar days of the ensuing year after any calendar year commencing
on the Effective Date. 

Stock Options 

4.4                  
It is hereby acknowledged and agreed that the Executive has already been
granted, commensurate with the Underlying Agreement and prior to the Effective
Date of this Agreement, and subject to the rules and policies of the TSX Venture
Exchange, all applicable securities legislation and the terms and conditions of
the Company’s existing fixed share option plan (the “Option Plan”),
certain incentive stock options (each a “Stock Option”) for the purchase
of certain common shares of the Company (each an “Option Share”)
exercisable at fair market value and vesting over a period of 12 months. 

                       
It is hereby acknowledged that the Stock Options already granted to the
Executive prior the Execution Date of this Agreement were negotiated as between
the Parties in the context of the stage of development of the Company existing
prior to the Execution Date of this Agreement. Correspondingly, it is hereby
acknowledged and agreed that the number of Stock Options granted by the Company
to the Executive shall be reviewed and renegotiated at the request of either
Party on a reasonably consistent basis during the continuance of this Agreement
and, in the event that the Parties cannot agree, then the Executive will be
granted annually, and as soon as reasonably possible on each anniversary date of
the Effective Date hereof, an additional vesting Stock Option to acquire not
less than an additional 200,000 Option Shares of the Company under the Company’s
then Option Plan, exercisable at the Company’s market price at the time of
grant, and vesting over a period of not less than 12 months from the date of
grant in each instance. Any dispute respecting either the effectiveness or
magnitude of the final number and terms hereunder shall be determined by
arbitration in accordance with Part 12 herein. 

Group Insurance and Health Benefits 

4.5                  
It is hereby acknowledged and agreed that, during the continuance of this
Agreement, the Executive shall be entitled to participate fully in each of the
Company’s respective medical services plans and management and employee benefits
program(s) which the Company provides, from time to time, to all senior management
personnel and including, without limitation, the following benefits
(collectively, the “Group Benefits”): 

- 7 - 

	 	(a) 	
      group health insurance;

	 	 	 
	 	(b) 	
      accidental death and dismemberment insurance and
      including, without limitation, travel accident insurance;

	 	 	 
	 	(c) 	
      group life insurance;

	 	 	 
	 	(d) 	
      disability insurance;

	 	 	 
	 	(e) 	
      drug coverage; and

	 	 	 
	 	(f) 	
      dental coverage.

Individual Benefits 

4.6                  
It is hereby acknowledged and agreed that, during the continuance of this
Agreement, the Executive shall also be entitled, in addition to the Executive’s
participation in the Company’s Group Benefits, to the following specific
benefits owing to current position and place of employment with the Company
(collectively, the “Individual Benefits”): 

	 	(a) 	
      the payment and/or reimbursement of all reasonable and
      pre-approved expenses associated with the provision for not less than one,
      and not greater than four, round trip airfares per year by the Executive
      to and from Orange County, California, U.S.A., and Portland, Oregon,
      U.S.A.;

	 	 	 
	 	(b) 	
      the payment and/or reimbursement of all reasonable and
      pre-approved expenses associated with the provision for one round trip
      airfare per year by the Executive’s immediate family members to and from
      Orange County, California, U.S.A., and Portland, Oregon, U.S.A.;
  and

	 	 	 
	 	(c) 	
      the payment and/or reimbursement of all reasonable and
      pre-approved expenses associated with health improvement programs for
      maintaining a healthy, balanced lifestyle incurred by the Executive and
      not to exceed U.S. $1200.00 in any one calendar year without the prior
      written approval of the CEO of the Company.

Payment of compensation and status as a taxable employee

4.7                  
It is hereby also acknowledged and agreed that the Executive will be classified
as a taxable employee of the Company for all purposes, such that all
compensation which is provided by the Company to the Executive under this
Agreement, or otherwise, will be calculated and payable on a net basis for which
all required statutory taxes will first be deducted by the Company and remitted
on behalf of the Executive to all applicable taxation authorities in each
instance. 

- 8 - 

PART 5 
ANNUAL VACATION 

Period 

5.1                  
The Executive will be entitled to four weeks’ paid annual vacation per calendar
year (the “Vacation”) during the Initial Term and during the continuance
of this Agreement, to be taken at a time or times which are approved by the CEO
of the Company (such approval not to be unreasonably withheld); provided,
however, taking into account the operational requirements of the Company and the
need for the timely performance of the Executive’s Services; and provided,
further, that such weeks shall not be taken consecutively. In this regard it is
further understood hereby that the Executive’s entitlement to any such paid
Vacation during any year (including the initial year) during the continuance of
this Agreement will be subject, at all times, to the Executive’s entitlement to
only a pro rata portion of any such paid Vacation time during any year
(including the initial year) and to the effective date upon which this Agreement
is terminated prior to the end of any such year for any reason whatsoever. 

Unused 

5.2                  
Unused vacation may not be carried over after the completion of each calendar
year and any unused vacation will be paid out in cash. 

PART 6 
EXPENSES 

Reimbursement of Expenses 

6.1                  
The Company will reimburse the Executive for all pre-approved and reasonable
travel and other out-of-pocket expenses incurred by the Executive directly
related to the performance of the Services (collectively, the
“Expenses”). The Executive will account for such Expenses in accordance
with the policies and directions provided by the Company from time to time. 

PART 7 
TERMINATION 

Definitions 

7.1                  
In this Agreement: 

	 	(a) 	
      “Just Cause” means any act, omission, behaviour,
      conduct or circumstance of the Executive that constitutes just cause for
      dismissal of the Executive at common law; and

	 	 	 
	 	(b) 	
      “Change In Control” means either: (i) a merger or
      acquisition in which the Company is not the surviving entity; except for a
      transaction the principal purpose of which is to change the incorporating
      jurisdiction of the Company; (ii) the sale, transfer or other disposition
      of all or substantially all of the assets of the Company; or (iii) any
      other corporate reorganization or business combination in which 50% or
      more of the outstanding voting stock of the Company is transferred, or
      exchanged through merger, to different holders in a single transaction of
      the Company or in a series of related
transactions.

- 9 - 

Termination by the Company for Just Cause 

7.2                  
The Company may terminate the employment of the Executive under this Agreement
summarily, without any notice or any payment in lieu of notice, for Just Cause.

Voluntary Termination By the Executive 

7.3                  
The Executive may terminate the Executive’s employment under this Agreement for
any reason by providing not less than 90 calendar days’ notice in writing to the
Company; provided, however, that the Company may waive or abridge any notice
period specified in such notice in its sole and absolute discretion. 

Termination By the Executive for any Change In Control

7.4                  
The Executive may terminate the Executive’s employment under this Agreement in
connection with any Change In Control of the Company by providing not less than
90 calendar days’ notice in writing of said termination to the Company after the
Change In Control has been effected; provided, however, that the Company may
waive or abridge any notice period specified in such notice in its sole and
absolute discretion; and provided, further, that the Company will be entitled to
carefully review and object to any said Change In Control designation by the
Executive within 30 calendar days of said notice; the final determination of
which, upon dispute, if any, to be determined by arbitration in accordance with
Part 12 herein. 

Death of the Executive 

7.5                  
The employment of the Executive will terminate upon the death of the Executive.

No Payments in Certain Events 

7.6                  
Upon the date of the termination of the employment of the Executive: 

	 	(a) 	
      for Just Cause in accordance with section 7.2 herein;
      or

	 	 	 
	 	(b) 	
      by the voluntary termination of employment by the
      Executive in accordance with section 7.3 herein;

(in each instance the “Effective Date of Termination”
herein), the Executive will be entitled to compensation earned by the Executive
before the Effective Date of Termination calculated pro rata up to and including
the Effective Date of Termination and will not be entitled to any severance or
other payments under this Agreement or otherwise. 

Payments in the Event of Termination by Death 

7.7                  
The Company will, upon the death of the Executive during the continuance of this
Agreement in accordance with section 7.5 herein (the “Effective Date of
Termination” herein), provide the Executive’s estate and, if applicable, the
Executive’s immediate family members, with the following: 

	 	(a) 	
      pay to the Executive’s estate the total of:

	 	 	 	 
	 		(i) 	
      six months of the then Base Salary less any required
      statutory deductions, if any;

- 10 - 

	 	(ii) 	
      that portion of any then declared and/or earned or
      accrued Bonus, prorated to the end of the six-month period from the
      Effective Date of Termination, that the CEO of the Company determines
      would likely have been paid to the Executive for the six months from the
      Effective Date of Termination; such determination to be made fairly and
      reasonably and taking into account all relevant circumstances;

	 	 	 
	 	(iii) 	
      the present value, as determined by the Company, acting
      reasonably, of each of the then Individual Benefits described under
      section 4.6 herein that would have been enjoyed by the Executive during
      the next six months from the Effective Date of Termination assuming the
      Executive’s employment was not terminated and assuming the then current
      level of Individual Benefits were continued for that six months;

	 	 	 
	 	(iv) 	
      any outstanding Vacation pay as at the Effective Date of
      Termination; and

	 	 	 
	 	(v) 	
      any outstanding Expenses as at the Effective Date of
      Termination; and

	 	(b) 	
      subject to the Company’s then Option Plan and the rules
      and policies of any regulatory authority and stock exchange having
      jurisdiction over the Company, allow for the Executive’s estate to then
      exercise any unexercised and fully vested portion of the Stock Options on
      the Effective Date of Termination at any time during 12 months from the
      Effective Date of Termination.

Payments in the Event of Non-Renewal or in the Event of
Termination Without Just Cause 

7.8                  
The Company will, if it either (i) does not renew this Agreement after the
Initial Term or any Renewal Term by providing a Company’s Notice in accordance
with section 1.2 herein or (ii) terminates the employment of the Executive other
than for Just Cause or by death in accordance with sections 7.2 and 7.5 herein
(in such instance on the “Effective Date of Termination” herein), provide
the Executive with the following: 

	 	(a) 	
      pay to the Executive the total of:

	 	 	 	 
	 		(i) 	
      24 months of the then Base Salary less any required
      statutory deductions, if any;

	 	 	 	 
	 		(ii) 	
      that portion of any then declared and/or earned or
      accrued Bonus, prorated to the end of the six-month period from the
      Effective Date of Termination, that the CEO of the Company determines
      would likely have been paid to the Executive for the six months from the
      Effective Date of Termination; such determination to be made fairly and
      reasonably and taking into account all relevant circumstances;

	 	 	 	 
	 		(iii) 	
      the present value, as determined by the Company, acting
      reasonably, of each of the then Individual Benefits described under
      section 4.6 herein that would have been enjoyed by the Executive during
      the next 12 months from the Effective Date of Termination assuming the
      Executive’s employment was not terminated and assuming the then current
      level of Individual Benefits were continued for that 12 months;

	 	 	 	 
	 		(iv) 	
      any outstanding Vacation pay as at the Effective Date of
      Termination; and

	 	 	 	 
	 		(v) 	
      any outstanding Expenses as at the Effective Date of
      Termination;

- 11 - 

	 	(b) 	
      maintain the Executive’s then Group Benefits for a period
      of one year from the Effective Date of Termination;

	 	 	 
	 	(c) 	
      pay all reasonable Relocation Expenses, supported by
      original receipts, incurred by the Executive and the Executive’s spouse
      and any children, in leaving Portland, Oregon, U.S.A., as a result of the
      termination of the Executive’s employment herein for a period of three
      months from the Effective Date of Termination; and

	 	 	 
	 	(d) 	
      subject to the Company’s then Option Plan and the rules
      and policies of any regulatory authority and stock exchange having
      jurisdiction over the Company, allow for the Executive to then exercise
      any unexercised and fully vested portion of the Stock Option on the
      Effective Date of Termination at any time during 12 months from the
      Effective Date of Termination.

Payments in the Event of Termination upon a Change In
Control 

7.9                  
The Company will, if the Executive terminates the Executive’s employment as a
consequence of a Change In Control of the Company (in such instance on the
“Effective Date of Termination” herein): 

	 	(a) 	
      pay the total of:

	 	 	 	 
	 		(i) 	
      24 months of the then Base Salary less any required
      statutory deductions, if any;

	 	 	 	 
	 		(ii) 	
      that portion of any then declared and/or earned or
      accrued Bonus, prorated to the end of the six-month period from the
      Effective Date of Termination, that the CEO of the Company determines
      would likely have been paid to the Executive for the six months from the
      Effective Date of Termination; such determination to be made fairly and
      reasonably and taking into account all relevant circumstances;

	 	 	 	 
	 		(iii) 	
      the present value, as determined by the Company, acting
      reasonably, of each of the then Individual Benefits described under
      section 4.6 herein that would have been enjoyed by the Executive during
      the next six months from the Effective Date of Termination assuming the
      Executive’s employment was not terminated and assuming the then current
      level of Individual Benefits were continued for that six months;

	 	 	 	 
	 		(iv) 	
      any outstanding Vacation pay as at the Effective Date of
      Termination; and

	 	 	 	 
	 		(v) 	
      any outstanding Expenses as at the Effective Date of
      Termination;

	 	 	 	 
	 	(b) 	
      maintain the Executive’s then Group Benefits for a period
      of one year from the Effective Date of Termination;

	 	 	 	 
	 	(c) 	
      pay all reasonable Relocation Expenses, supported by
      original receipts, incurred by the Executive and the Executive’s spouse
      and any children, in leaving Portland, Oregon, U.S.A., as a result of the
      termination of the Executive’s employment herein for a period of three
      months from the Effective Date of Termination;
and

- 12 - 

	 	(d) 	
      subject to the Company’s then Option Plan and the rules
      and policies of any regulatory authority and stock exchange having
      jurisdiction over the Company, allow for the Executive to then exercise
      any unexercised and fully vested portion of the Stock Option on the
      Effective Date of Termination at any time during 12 months from the
      Effective Date of Termination.

Executive to Provide Release 

7.10                
Subject to the Company’s making the payment and maintaining the Group Benefits
and Individual Benefits as provided in sections 7.7, 7.8 and 7.9 herein, the
Executive will execute and deliver to the Company a full and final release of
the Company, in the form provided by the Company, in respect of the Executive’s
employment under this Agreement and otherwise. 

Manner of Payment 

7.11                
The Company may, in its sole and absolute discretion, pay the amounts referred
to in sections 7.7, 7.8 and 7.9 herein either in a manner consistent with the
general payroll practice of the Company over the course of the relevant time
period or in a lump sum payment within seven business days after receipt by the
Company of the executed full and final release referred to in section 7.9
herein. 

Return of Materials 

7.12                 All
documents and materials in any form or medium and including, but not limited to,
files, forms, brochures, books, correspondence, memoranda, manuals and lists
(including lists of customers, suppliers, products and prices), all equipment
and accessories and again including, but not being limited to, leased
automobiles, computers, computer disks, software products, cellular phones and
personal digital assistants, all keys, building access cards, parking passes,
credit cards, and other similar items pertaining to the business of the Company
that may come into the possession or control of the Executive, will at all times
remain the property of the Company and, on termination of the Executive’s
employment for any reason, the Executive will promptly deliver to the Company
all property of the Company in the possession of the Executive or directly or
indirectly under the control of the Executive, and will not reproduce or copy
any such property or other property of the Company. 

PART 8 
CONFIDENTIALITY 

Confidential Information 

8.1                  
The Executive acknowledges that: 

	 	(a) 	
      the Executive may, during the course of employment with
      the Company, acquire information which is confidential in nature or of
      great value to the Company and its subsidiaries including, without
      limitation, matters or subjects concerning corporate assets, cost and
      pricing data, customer listing, financial reports, formulae, inventions,
      know-how, marketing strategies, products or devices, profit plans,
      research and development projects and findings, computer programs,
      suppliers, and trade secrets, whether in the form of records, files,
      correspondence, notes, data, information, or any other form, including
      copies or excerpts thereof (collectively, the “Confidential
      Information”); the disclosure of any of which to competitors,
      customers, clients or suppliers of the Company,
  unauthorized personnel of the Company or to third parties would be
  highly detrimental to the best interests of the Company; and

- 13 - 

	 	(b) 	
      the right to maintain the confidentiality of Confidential
      Information, and the right to preserve the Company’s goodwill, constitute
      proprietary rights which the Company is entitled to
  protect.

8.2                  
The Executive will, while employed with the Company and at all times
thereafter:

	 	(a) 	
      hold all Confidential Information that the Executive
      receives in trust for the sole benefit of the Company and in strictest
      confidence;

	 	 	 
	 	(b) 	
      protect all Confidential Information from disclosure and
      will not take any action that could reasonably be expected to result in
      any Confidential Information losing its character as Confidential
      Information, and will take all lawful action necessary to prevent any
      Confidential Information from losing its status as Confidential
      Information; and

	 	 	 
	 	(c) 	
      neither, except as required in the course of performing
      duties and responsibilities under this Agreement, directly or indirectly
      use, publish, disseminate or otherwise disclose any Confidential
      Information to any unauthorized personnel of the Company or to any third
      party, nor use Confidential Information for any purpose other than the
      purposes of the Company, without the prior written consent of the Company,
      which consent may be withheld in the Company’s sole and absolute
      discretion.

8.3                  
The restrictions on the Executive’s use or disclosure of all Company
Information, as set forth in this Part 8, shall continue following the
expiration or termination of the Executive’s employment with the Company
regardless of the reasons for or manner of such termination. 

8.4                  
Notwithstanding section 8.2 herein, the Executive may, if and solely to the
extent required by lawful subpoena or other lawful process, disclose
Confidential Information but, to the extent possible, shall first notify the
Company of each such requirement so that the Company may seek an appropriate
protective order or waive compliance with the provisions of this Agreement. The
Executive will co-operate fully with the Company at the expense of the Company
in seeking any such protective order. 

PART 9 
NON-COMPETITION AND
NON-SOLICITATION 

Non-Competition and Payments for Enforcement by the Company
during Standstill Period 

9.1                  
The Executive acknowledges that the Executive’s Services under this Agreement
are of special, unique and extraordinary character which give the Executive
value to the Company; the loss of which cannot adequately be compensated in
damages or by an action at law. In addition to, and not in limitation of any
other restrictive covenant which may be binding on the Executive, the Executive
shall not anywhere in North America and Europe, for a period of one year after
the termination of this Agreement (the “Standstill Period” herein) for
any reason in any manner whatsoever: 

	 	(a) 	
      carry on, engage in, or be concerned with or interested
      in; or

- 14 - 

	 	(b) 	
      permit the Executive’s name or any part thereof to in any
      manner whatsoever to be used or connected with any business that is, or
      any interest in any business that is;

in direct competition with the business of the Company or any
of its subsidiaries. 9.2 The Executive agrees that: 

	 	(a) 	
      all restrictions contained in section 9.1 herein are
      reasonable and valid in the circumstances and all defences to the strict
      enforcement thereof by the Company are hereby waived by the
    Executive;

	 	 	 
	 	(b) 	
      the remedy available to the Company at law for any breach
      by him of section 9.1 herein will be inadequate and that the Company, on
      any application to a Court, shall be entitled to temporary and permanent
      injunctive relief against the Executive without the necessity of proving
      actual damage to the Company; and

	 	 	 
	 	(c) 	
      if the foregoing covenant is found to be unreasonable to
      any extent by a court of competent jurisdiction adjudicating upon the
      validity of the covenant, whether as to the scope of the restriction, the
      area of the restriction or the duration of the restriction, then such
      restriction shall be reduced to that which is in fact declared reasonable
      by such court, or a subsequent court of competent jurisdiction, requested
      to make such a declaration.

9.3                  
Should this Agreement be terminated for any reason (in such instance on the
“Effective Date of Termination” herein) and should the Executive, during
the one year Standstill Period from the Effective Date of Termination, secure a
bona fide employment or consulting position outside of the Company (which the
Executive evidences in writing to the Company; the “Other Position”)
which may in any manner infringe the restrictions contained in section 9.1
herein, and should the Company, acting reasonably, not release the Executive
from the restrictions contained in sections 9.1 and 9.2 herein in taking such
Other Position, then, during the Standstill Period, and in order to compensate
the Executive for not being in a position to accept the Other Position, the
Company will, during the Standstill Period: 

	 	(a) 	
      continue to pay the Executive the Executive’s then Base
      Salary; and

	 	 	 
	 	(b) 	
      continue to maintain the Executive’s then Group
      Benefits.

Non-Solicitation 

9.4                  
The Executive hereby agrees that the Executive will not, during the period
commencing on the Effective Date hereof and ending one year following the
termination or expiration of this Agreement for any reason, be a party to or
abet any solicitation of customers, clients, referral services, consultants or
suppliers of the Company or any of its subsidiaries, to transfer business from
the Company or any of its subsidiaries to any other person, or seek in any way
to persuade or entice any employee of the Company or any of its subsidiaries to
leave that employment or to be a party to or abet any such action. 

- 15 - 

PART 10 
OWNERSHIP OF INTELLECTUAL
PROPERTY 

Definitions 

10.1                 In
this Agreement, “Inventions” means, collectively, all: 

	 	(a) 	
      discoveries, inventions, ideas, suggestions, reports,
      documents, designs, technology, methodologies, compilations, concepts,
      procedures, processes, products, protocols, treatments, methods, tests,
      improvements, work product and computer programs (including all source
      code, object code, compilers, libraries and developer tools, and any
      manuals, descriptions, data files, resource files and other such materials
      relating thereto), and

	 	 	 
	 	(b) 	
      each and every part of the
foregoing;

that are conceived, developed, reduced to practice or otherwise
made by the Executive either alone or with others or, in any way, relate to the
present or proposed programs, services, products or business of the Company, or
to tasks assigned to the Executive in connection with the Executive’s duties or
in connection with any research or development carried on or planned by the
Company, whether or not such Inventions are conceived, developed, reduced to
practice or otherwise made during the Executive’s employment or during regular
working hours and whether or not the Executive is specifically instructed to
conceive, develop, reduce to practice or otherwise make same. 

Exclusive Property 

10.2                 The
Executive agrees that all Inventions, and any and all services and products
which embody, emulate or employ any such Invention, shall be the sole property
of the Company and all copyrights, patents, patent rights, trademarks, service
marks, reproduction rights and all other proprietary title, rights and interest
in and to each such Invention, whether or not registrable (collectively, the
“Intellectual Property Rights”), shall belong exclusively to the Company.

Work for Hire 

10.3                
For purposes of all applicable copyright laws to the extent, if any, that such
laws are applicable to any such Invention or any such service or product, it
shall be considered a work made for hire and the Company shall be considered the
author thereof. 

Disclosure 

10.4                 The
Executive will promptly disclose to the Company, or any persons designated by
it, all Inventions and all such services or products. 

Assignment 

10.5                
The Executive hereby assigns and further agrees to, from time to time as such
Inventions arise, assign to the Company or its nominee (or their respective
successors or assigns) all of the Executive’s right, title and interest in and
to the Inventions and the Intellectual Property Rights without further payment
by the Company. 

- 16 - 

Moral Rights 

10.6                
The Executive hereby waives and further agrees to, from time to time as such
Inventions arise, waive for the benefit of the Company and its successors or
assigns all the Executive‘s moral rights in respect of the Inventions. 

Further Assistance 

10.7                
The Executive agrees to assist the Company in every proper way (but at the
Company’s expense) to obtain and, from time to time, enforce the Intellectual
Property Rights and to the Inventions in any and all countries, and to that end
will execute all documents for use in applying for, obtaining and enforcing the
Intellectual Property Rights in and to such Inventions as the Company may
desire, together with any assignments of such Inventions to the Company or
persons designated by it. The Executive’s obligation to assist the Company in
obtaining and enforcing such Intellectual Property Rights in any and all
countries shall continue beyond the termination of this Agreement. 

Representations and Warranties 

10.8                
The Executive hereby represents and warrants that the Executive is subject to no
contractual or other restriction or obligation that will in any manner limit the
Executive’s obligations under this Agreement or activities on behalf of the
Company. The Executive hereby represents and warrants to the Company that the
Executive has no continuing obligations to any person (a) with respect to any
previous invention, discovery or other item of intellectual property or (b) that
requires the Executive not to disclose the same. 

PART 11 
INDEMNIFICATION AND LEGAL
PROCEEDINGS 

Indemnification 

11.1                
The Parties hereby each agree to indemnify and save harmless the other Party and
including, where applicable, the other Party’s respective subsidiaries and
affiliates and each of their respective directors, officers, associates,
affiliates and agents (each such party being an “Indemnified Party”),
harmless from and against any and all losses, claims, actions, suits,
proceedings, damages, liabilities or expenses of whatever nature or kind and
including, without limitation, any investigation expenses incurred by any
Indemnified Party, to which an Indemnified Party may become subject by reason of
the terms and conditions of this Agreement. 

No indemnification 

11.2                 This
indemnity will not apply in respect of an Indemnified Party in the event and to
the extent that a Court of competent jurisdiction in a final judgment shall
determine that the Indemnified Party was grossly negligent or guilty of wilful
misconduct. 

Claim of indemnification 

11.3                
The Parties agree to waive any right they might have of first requiring the
Indemnified Party to proceed against or enforce any other right, power, remedy,
security or claim payment from any other person before claiming this indemnity.

- 17 - 

Notice of claim 

11.4                
In case any action is brought against an Indemnified Party in respect of which
indemnity may be sought against either of the Parties (said Party then being the
“Indemnitee”), the Indemnified Party will give both Parties prompt
written notice of any such action of which the Indemnified Party has knowledge
and the Indemnitee will undertake the investigation and defense thereof on
behalf of the Indemnified Party, including the prompt employment of counsel
acceptable to the Indemnified Party affected and the Indemnitee and the payment
of all expenses. Failure by the Indemnified Party to so notify shall not relieve
the Indemnitee of the Indemnitee‘s obligation of indemnification hereunder
unless (and only to the extent that) such failure results in a forfeiture by the
Indemnitee of substantive rights or defenses. 

Settlement 

11.5               
 No admission of liability and no settlement of any action shall be made
without the consent of each of the Parties and the consent of the Indemnified
Party affected, such consent not to be unreasonable withheld. 

Legal Proceedings 

11.6                 Notwithstanding
that the Indemnitee will undertake the investigation and defense of any action,
an Indemnified Party will have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel will be at the expense of the Indemnified Party unless: 

	 	(a) 	
      such counsel has been authorized by the
  Indemnitee;

	 	 	 
	 	(b) 	
      the Indemnitee has not assumed the defense of the action
      within a reasonable period of time after receiving notice of the
      action;

	 	 	 
	 	(c) 	
      the named parties to any such action include that any
      Party and the Indemnified Party shall have been advised by counsel that
      there may be a conflict of interest between any Party and the Indemnified
      Party; or

	 	 	 
	 	(d) 	
      there are one or more legal defenses available to the
      Indemnified Party which are different from or in addition to those
      available to any Party.

Contribution 

11.7       
         If for any reason other than the
gross negligence or bad faith of the Indemnified Party being the primary cause
of the loss claim, damage, liability, cost or expense, the foregoing
indemnification is unavailable to the Indemnified Party or insufficient to hold
them harmless, the Indemnitee shall contribute to the amount paid or payable by
the Indemnified Party as a result of any and all such losses, claim, damages or
liabilities in such proportion as is appropriate to reflect not only the
relative benefits received by the Indemnitee on the one hand and the Indemnified
Party on the other, but also the relative fault of the Indemnitee and the
Indemnified Party and other equitable considerations which may be relevant.
Notwithstanding the foregoing, the Indemnitee shall in any event contribute to
the amount paid or payable by the Indemnified Party, as a result of the loss,
claim, damage, liability, cost or expense (other than a loss, claim, damage,
liability, cost or expenses, the primary cause of which is the gross negligence
or bad faith of the Indemnified Party), any excess of such amount over the
amount of the fees actually received by the Indemnified Party hereunder. 

- 18 - 

PART 12 
ARBITRATION 

Matters for arbitration 

12.1     
           Except for matters
of indemnity or in the case of urgency to prevent material harm to a substantive
right or asset, the Parties agree that all questions or matters in dispute with
respect to this Agreement shall be submitted to arbitration pursuant to the
terms hereof. This provision shall not prejudice a Party from seeking a Court
order or assistance to garnish or secure sums or to seek summary remedy for such
matters as counsel may consider amenable to summary proceedings. 

Notice 

12.2         
       It shall be a condition precedent to the
right of any Party to submit any matter to arbitration pursuant to the
provisions hereof that any Party intending to refer any matter to arbitration
shall have given not less than five business days’ prior written notice of its
intention to do so to the other Party together with particulars of the matter in
dispute. On the expiration of such five business days the Party who gave such
notice may proceed to refer the dispute to arbitration as provided for herein.
Except for matters of indemnity or in the case of urgency to prevent material
harm to a substantive right or asset, the Parties agree that all questions or
matters in dispute with respect to this Agreement shall be submitted to
arbitration pursuant to the terms hereof. This provision shall not prejudice a
Party from seeking a Court order or assistance to garnish or secure sums or to
seek summary remedy for such matters as counsel may consider amenable to summary
proceedings. 

Appointments 

12.3      
          The Party desiring
arbitration shall appoint one arbitrator, and shall notify the other Party of
such appointment, and the other Party shall, within five business days after
receiving such notice, appoint an arbitrator, and the two arbitrators so named,
before proceeding to act, shall, within five business days of the appointment of
the last appointed arbitrator, unanimously agree on the appointment of a third
arbitrator, to act with them and be chairperson of the arbitration herein
provided for. If the other Party shall fail to appoint an arbitrator within five
business days after receiving notice of the appointment of the first arbitrator,
and if the two arbitrators appointed by the Parties shall be unable to agree on
the appointment of the chairperson, the chairperson shall be appointed in
accordance with the provisions of the British Columbia International
Commercial Arbitration Act (the “Arbitration Act”). Except as
specifically otherwise provided in this section, the arbitration herein provided
for shall be conducted in accordance with such Arbitration Act. The chairperson,
or in the case where only one arbitrator is appointed, the single arbitrator,
shall fix a time and place for the purpose of hearing the evidence and
representations of the Parties, and the chairperson shall preside over the
arbitration and determine all questions of procedure not provided for by the
Arbitration Act or this section. After hearing any evidence and representations
that the Parties may submit, the single arbitrator, or the arbitrators, as the
case may be, shall make an award and reduce the same to writing, and deliver one
copy thereof to each of the Parties. The expense of the arbitration shall be
paid as specified in the award. 

Award 

12.4        
        The Parties agree that the award of a
majority of the arbitrators, or in the case of a single arbitrator, of such
arbitrator, shall be final and binding upon each of them. 

- 19 - 

PART 13
OTHER PROVISIONS

Waivers and Amendments 

13.1          
      This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, only by a written agreement between
the Parties. Failure or delay by either Party to enforce compliance with any
term or condition of this Agreement shall not constitute a waiver of such term
or condition. 

No Representation or Claims 

13.2        
        The Executive agrees that the
Executive has not been induced to enter into this Agreement by reason of any
statement, representation, understanding or promise not expressly set out in
this Agreement. The Executive has no claim against the Company arising from any
Services provided by the Executive to the Company in any capacity prior to the
effective date of this Agreement. 

Governing Law 

13.3        
        The situs of this Agreement is
Vancouver, British Columbia, Canada, and for all purposes this Agreement will be
governed exclusively by and construed and enforced in accordance with the laws
prevailing in the Province of British Columbia, Canada, and the federal laws of
Canada applicable thereto. 

Notices 

13.4      
          Any notice or other
communication or writing required or permitted to be given under this Agreement
or for the purposes of this Agreement will be in writing and will be
sufficiently given if delivered personally, or if transmitted by facsimile
transmission (with original to follow by mail) or other form of recorded
communication, tested prior to transmission, to: 

	 	(a) 	if to the Company: 
	 	  	Crailar Technologies Inc. 
	 	  	305 - 4420 Chatterton Way, Victoria,
      British Columbia, Canada, V8X 5J2 
	 	  	Attention: 	Ken Barker, CEO 
	 	  	Phone: 	(250) 658-8582 
	 	  	Fax: 	(250) 658-8586 
	 	  	Email: 	ken.barker@crailar.com
	 	  	  	  
	 	  	with a copy to counsel for the
      Company: 
	 	  	McMillan LLP 
	 	  	Suite 1500, 1055 West Georgia Street,
      Vancouver, British Columbia, Canada, 
	 	  	V6E 4N7 	  
	 	  	Attention: 	Thomas J. Deutsch 
	 	  	Phone: 	(604) 691-7445 
	 	  	Fax: 	(604) 893-2679 
	 	  	Email: 	thomas.deutsch@mcmillan.ca; and 
	 	  	  	  
	 	(b) 	if to the Executive: 
	 	  	Ted Sanders 	  
	 	  	22441 Canyon Crest Drive, Mission
      Viejo, California, U.S.A., 92692 
	 	  	Phone: 	(949) 466-6050 
	 	  	Email: 	tedsandersjr@yahoo.com;

- 20 - 

or to such other address as the Party to whom such notice is to
be given will have last notified the Party giving the same in the manner
provided in this section. Any notice so delivered will be deemed to have been
given and received on the day it is so delivered at such address; provided that
such day is not a Business Day (as herein defined) then the notice will be
deemed to have been given and received on the Business Day next following the
day it is so delivered. Any notice so transmitted by facsimile transmission or
other form of recorded communication will be deemed to have been given and
received on the day of its confirmed transmission (as confirmed by the
transmitting medium), provided that if such day is not a Business Day then the
notice will be deemed to have been given and received on the Business Day next
following such day. “Business Day” means any day that is not a Saturday,
Sunday or civic or statutory holiday in the Province of British Columbia,
Canada. 

Assignment 

13.5     
           The Executive may
not assign this Agreement or any right or obligation under it. 

Severability 

13.6     
           If any provision of
this Agreement is determined to be invalid or unenforceable in whole or in part,
such invalidity or unenforceability shall attach only to such provision or part
thereof and the remaining part of such provision and all other provisions hereof
shall continue in full force and effect. The Parties agree to negotiate in good
faith to agree to a substitute provision which shall be as close as possible to
the intention of any invalid or unenforceable provision as may be valid or
enforceable.

Independent Legal Advice 

13.7     
           The Executive
acknowledges that the Company has recommended that the Executive obtain
independent legal advice with respect to this Agreement, and that the Executive
has had a reasonable opportunity to do so prior to executing this Agreement.

Force Majeure 

13.8       
         If either Party is at any time
either during this Agreement or thereafter prevented or delayed in complying
with any provisions of this Agreement by reason of strikes, walk-outs, labour
shortages, power shortages, fires, wars, acts of God, earthquakes, storms,
floods, explosions, accidents, protests or demonstrations by environmental
lobbyists or native rights groups, delays in transportation, breakdown of
machinery, inability to obtain necessary materials in the open market,
unavailability of equipment, governmental regulations restricting normal
operations, shipping delays or any other reason or reasons beyond the control of
that Party, then the time limited for the performance by that Party of its
respective obligations hereunder shall be extended by a period of time equal in
length to the period of each such prevention or delay. A Party shall within
three calendar days give notice to the other Party of each event of force
majeure under this section, and upon cessation of such event shall furnish the
other Party with notice of that event together with particulars of the number of
days by which the obligations of that Party hereunder have been extended by
virtue of such event of force majeure and all preceding events of force majeure.

Time of the essence 

13.9       
         Time will be of the essence of
this Agreement. 

- 21 - 

Enurement 

13.10          
 This Agreement will enure to the benefit of and will be binding upon the
Parties and their respective heirs, executors, administrators and assigns. 

Further assurances 

13.11           
The Parties will from time to time after the execution of this Agreement make,
do, execute or cause or permit to be made, done or executed, all such further
and other acts, deeds, things, devices and assurances in law whatsoever as may
be required to carry out the true intention and to give full force and effect to
this Agreement. 

No partnership or agency 

13.12           
The Parties have not created a partnership and nothing contained in this
Agreement shall in any manner whatsoever constitute any Party the partner, agent
or legal representative of the other Parties, nor create any fiduciary
relationship between them for any purpose whatsoever. 

Personal Information 

13.13          
 The Executive acknowledges that the Company is obligated to comply with
the British Columbia Personal Information Protection Act and with any
other applicable legislation governing the collection, use, storage and
disclosure of personal information. The Executive agrees to comply with all
Company personal information protection policies and with other policies,
controls and practices as they may exist, from time to time, in ensuring that
the Executive and the Company engage only in lawful collection, storage, use and
disclosure of personal information. 

Captions 

13.14           
The headings, captions, Part, section and subsection numbers appearing in this
Agreement are inserted for convenience of reference only and shall in no way
define, limit, construe or describe the scope or intent of this Agreement nor in
any way affect this Agreement. 

Counterparts 

13.15           
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and all of which together shall constitute one and the
same instrument. 

- 22 - 

                   
IN WITNESS WHEREOF the Parties have hereunto set their
respective hands and seals as at the Execution Date as hereinabove determined.

	The COMMON SEAL of 	) 	  
	CRAILAR TECHNOLOGIES INC., 	) 	  
	the Company herein, was hereunto affixed 	) 	  
	in the presence of: 	) 	           
             (C/S) 
	  	) 	  
	  	) 	  
	/s/ Kenneth C.
      Barker 	) 	  
	Authorized Signatory 	) 	  
	  	  	  
	SIGNED, SEALED and DELIVERED by 	) 	  
	TED SANDERS, 	) 	  
	the Executive herein, in the presence of: 	) 	  
	  	) 	  
	  	) 	  
	/s/ Jade
      Barker 	) 	  
	Witness Signature 	) 	/s/ Ted Sanders 
	  	) 	TED SANDERS 
	2364 NW Overton
      St., Portland OR 	) 	  
	Witness Address 	) 	  
	  	) 	  
	Jade Barker,
      Office Manager 	) 	  
	Witness Name and Occupation 	) 	  

____________________

Schedule A 

                   
This is Schedule “A” to that certain Senior Executive Employment Agreement as
entered into between Crailar Technologies Inc. (as the Company) and Ted Sanders
(as the Executive). 

Initial Services

                   
Without in any manner limiting the generality of the initial Services to be
provided by the Executive as set forth in Part 2 of the Agreement hereinabove,
it is hereby also acknowledged and agreed that the Executive will provide the
following specific Services to the Company, or to any of the Company’s
respective subsidiaries, as the case may be, and as may be determined by the
Board of Directors, from time to time, in its sole and absolute discretion, and
in conjunction with the development and maintenance of the Company’s various
business interests subject, at all times, to the direction of the Board of
Directors: 

	 	(a) 	
      undertake and perform the duties and responsibilities
      normally and reasonably associated with the office of CFO of a reporting
      company;

	 	 	 
	 	(b) 	
      maintain all required regulatory and governmental
      licences and approvals of various jurisdictions as may be required to act
      as the CFO of the Company;

	 	 	 
	 	(c) 	
      maintain, in good standing, all required and recommended
      professional accreditation as may be deemed necessary by the Company,
      acting reasonably in consultation with the Executive, in order for the
      Executive to fulfill all Services under the Agreement;

	 	 	 
	 	(d) 	
      devote reasonably full-time effort and attention to the
      business and affairs of the Company;

	 	 	 
	 	(e) 	
      perform the Services in a competent and efficient manner
      and in a manner consistent with the Executive’s fiduciary obligations to
      the Company as a senior or executive officer thereof and in compliance
      with all the Company policies, carry out all lawful instructions and
      directions from time to time given to the Executive and use the
      Executive’s best efforts to promote the interests and goodwill of the
      Company;

	 	 	 
	 	(f) 	
      initiation, coordination, implementation and management
      of all aspects of any program or project in connection with the financial
      development and maintenance of the Company’s various business
      interests;

	 	 	 
	 	(g) 	
      assistance in the organization and preparation of any and
      all business plans, technical reports, news releases and special
      shareholder or investment reports for the Company, or for any of the
      Company’s respective subsidiaries, as the case may be and as may be
      determined by the Board of Directors, from time to time, in its sole and
      absolute discretion, and in connection with the development and
      maintenance of the Company’s various business interests;

	 	 	 
	 	(h) 	
      liaison with and the setting up of all corporate
      alliances and regulatory associations for the Company, or for any of the
      Company’s respective subsidiaries, as the case may be and as may be
      determined by the Board of Directors, from time to time, in its sole and absolute
      discretion, and in connection with the financial development and
  maintenance of the Company’s various business interests;

- 2 - 

	 	(i) 	
      assistance in the negotiation and structuring of any
      proposed transaction which will maximize the Company’s interests in each
      subject transaction together with the presentation of a written summary of
      said structure; and

	 	 	 
	 	(j) 	
      assistance in all other matters and services in
      connection with the development and maintenance of the Company’s various
      business interests as may be determined by the Board of Directors, from
      time to time, in its sole and absolute discretion.

    
              
     In this regard it is hereby acknowledged and
agreed that the Executive shall be entitled to communicate with and shall rely
upon the immediate advice, direction and instructions of the CEO of the Company,
or upon the advice or instructions of such other director or officer of the
Company as the CEO shall, from time to time, designate in times of the CEO’s
absence, in order to initiate, coordinate and implement the Services as
contemplated herein subject, at all times, to the final direction and
supervision of the Board of Directors. 

__________Exhibit 10.1 Stock Purchase Agreement-Adar

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 14, 2014, by and between Vgtel, Inc., a New York corporation, with headquarters located at 400 Rella Blvd Suite 174, Suffern, NY 10901 (the “Company”), and ADAR BAYS, LLC, a Florida limited liability company, with its address at 3411 Indian Creek Drive, Suite 403, Miami Beach, FL 33140 (the “Buyer”).

WHEREAS:

A.

The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

B.

Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8% convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $250,000.00 (with the first note being in the amount of $125,000.00 and the second note being in the amount of $125,000.00  (together with any note(s) issued in replacement thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The first of the two notes (the “First Note”) shall be paid for by the Buyer as set forth herein.  The second note (the “Second Note”) shall initially be paid for by the issuance of an offsetting $125,000.00 secured note issued to the Company by the Buyer (“Buyer Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that the Second Note may not be converted until it has been paid for in cash.  

C.

The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1.

Purchase and Sale of Note.

a.

Purchase of Note.  On each Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

b.

Form of Payment.  On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price. 

c.

Closing Date.  The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on or about May 14, 2014, or such other mutually agreed upon time.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.  Subsequent Closings shall occur when the Buyer Note is repaid. The Closing of the Second Note shall be on or before the dates specified in the Buyer Note.

2.

Buyer’s Representations and Warranties.  The Buyer represents and warrants to the Company that:

a.

Investment Purpose.  As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

b.

Accredited Investor Status.  The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

_____

Company Initials

c.

Reliance on Exemptions.  The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

d.

Information.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company.  Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer.  Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below.  The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

e.

Governmental Review.  The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

f.

Transfer or Re-sale.  The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).  Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.  

g.

Legends.  The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

2

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected.  The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be considered an Event of Default under the Note.

h.

Authorization; Enforcement. This Agreement has been duly and validly authorized.  This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

i.

Residency.  The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto. 

3.

Representations and Warranties of the Company.  The Company represents and warrants to the Buyer that:

a.

Organization and Qualification.  The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.

b.

Authorization; Enforcement.  (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c.

Issuance of Shares.  The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

d.

Acknowledgment of Dilution.  The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note.  The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

3

e.

No Conflicts.  The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its subsidiaries is a party, or (iii)  result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a material adverse effect).  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company is not in violation of the listing requirements of the OTCQB marketplace (the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable future, nor are the Company’s securities “chilled” by DTC.  The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.  

f.

Absence of Litigation.  Except as disclosed in the Company’s public filings, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could have a material adverse effect.  Schedule 3(f) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard to whether it would have a material adverse effect.  The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

g.

Acknowledgment Regarding Buyer’ Purchase of Securities.  The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities.  The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

h.

No Integrated Offering.  Neither the Company, nor any of its affiliates, nor ay person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.  The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

  

i.

Title to Property.  The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would not have a material adverse effect.  Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.

j.

Breach of Representations and Warranties by the Company.  If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under the Note.

4

4.

COVENANTS.

a.

Expenses.  At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents.  When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’s expenses shall be $5,750 in legal fees (and similar amounts for the Second Note) which shall be deduced from each Note when funded.

b.

Listing.  The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note.  The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement market, the Nasdaq stock market (“Nasdaq”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable.  The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCQB and any other markets on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such markets.

c.

Corporate Existence.  So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq, NYSE or AMEX.

d.

No Integration.  The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

e.

Breach of Covenants.  If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.

5.

Governing Law; Miscellaneous.

a.

Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Company and Buyer waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

5

b.

Counterparts; Signatures by Facsimile.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.  This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

c.

Headings.  The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

d.

Severability.  In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

e.

Entire Agreement; Amendments.  This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f.

Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:  

If to the Company, to: 

Vgtel, Inc.

400 Rella Blvd Suite 174

Suffern, NY 10901

Attn: Neil Fogel, CFO

               

 

     With a copy to:

Olshan Frome Wolonsky LLP

65 East 55th Street

New York, NY 10022

Attn: Spencer G. Feldman, Esq.

 If to the Buyer:

ADAR BAYS, LLC

3411 Indian Creek Drive, Suite 403

Miami Beach, FL 33140

Attn: Samuel Eisenberg

Each party shall provide notice to the other party of any change in address.

g.

Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.  Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

6

h.

Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

i.

Survival.  The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer.  The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

j.

Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

k.

No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

l.

Remedies.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.  

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

Vgtel, Inc.

By: /s/ Neil Fogel                                      

Neil Fogel

Chief Financial Officer 

ADAR BAYS, LLC.

By: /s/ Samuel Eisenberg                            

Name: Samuel Eisenberg 

Title:   Manager

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note:

$125,000.00

Aggregate Purchase Price:

$125,000.00 less $5,750.00 in legal fees and $11,500 in due diligence fees to Anubis Capital Partners, LLC 

With similar payments to be repeated on the cash funding of Note 2.

7

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