Exhibit 10.1

 

CONSULTING AGREEMENT

 

This Consulting Agreement (this “Agreement”) is made and entered into effective
this 10th day of May, 2017 (the “Effective Date”) by and between Surna, Inc., a
Nevada corporation whose address is 1780 55th Street, Suite A, Boulder, Colorado
80301 (the “Company”) and Stephen Keen, an adult resident of the State of
Colorado (the “Consultant”). The Consultant and the Company may be referred to
herein individually as a “Party” or collectively as the “Parties.”

 

AGREED ACKNOWLEDGMENTS

 

A.      The Company and its subsidiaries and affiliates are engaged in the
development, design and distribution of cultivation technologies for controlled
environment agriculture for state-regulated cannabis cultivation facilities and
traditional indoor agricultural facilities, including lighting, environmental
control, air sanitation and cultivation facilities designed to meet the specific
environmental conditions required for indoor cultivation and to reduce energy
and water consumption (the “Business”).

 

B.      In connection with the Business, the Company manufactures, sells and
delivers the following products and services: (i) liquid-based process cooling
and climate control systems, (ii) reflectors and lighting systems, including
water-cooled reflectors (iii) a full-service air sanitation technology program,
(iii) a full-service engineering package for designing and engineering
commercial scale thermodynamic systems specific to indoor cultivation facility
conditions, (iv) automation and control devices, systems and technologies used
for environmental, lighting and climate control in indoor cultivation
facilities, (v) a comprehensive, hybrid cultivation facility design and system
utilizing sunlight and a high-power LED lighting system, and (vi) and other
products, services, and technologies now or hereafter developed related to the
foregoing (collectively, the “Products”).

 

C.      The Business of the Company is highly competitive and requires the
creation of relationships with the Company’s customers because of the technology
and type of product involved.

 

D.      The Company has invested and will continue to invest considerable sums
of time, money, and other resources in developing the confidence and loyalty of
its customers and potential customers and to recruit, train, support and
compensate its employees and potential employees. In addition, the Company
expends significant amounts of time and money to attract, identify, locate, and
establish contacts and business relationships with prospective customers. The
loss of these existing and prospective relationships with customers, and with
existing and potential employees, will cause substantial and irreparable harm to
the Company, which cannot be accurately or adequately compensated by money
alone.

 

E.      The Consultant and the Company are parties to that certain Executive
Employment Agreement by and between the Consultant and the Company dated July
25, 2014 (“Prior Agreement”), which the Consultant and the Company acknowledge
and agree was mutually terminated by them effective April 28, 2017.

 

F.      The Company desires to retain the services of the Consultant as an
independent contractor. The Consultant desires to provide consulting services
benefiting the Company, as set forth herein. Both the Consultant and the Company
wish to enter into this Agreement to set forth the terms and conditions of the
Consultant’s engagement with the Company.

 

G.      The Consultant acknowledges that, in the course of the Consultant’s
consulting with the Company, the Consultant will frequently come into contact
with the Company’s customers and suppliers to such an extent that the Consultant
may be able to control or direct, in whole or in part, the business and
relationships between the Company and its customers and suppliers. Accordingly,
the Company reposes its trust in the Consultant not to disrupt or otherwise
misappropriate the customer and supplier relationships developed and/or
supported by the Company.

 

 

 

 

H.      The Consultant will also, during the course of the Consultant’s
consulting with the Company, have frequent and close contact with the Company’s
employees, managers, salespeople, and key staff employees. As a result of the
Consultant’s performance of services hereunder, the Consultant will acquire and
have access to confidential information concerning the Company’s employees,
prospective employees, customers, suppliers, and prospective customers and
suppliers that is not easily or generally available to the Company’s
competitors.

 

I.      The Consultant acknowledges that, by virtue of the Consultant’s
performance of services hereunder, the Consultant may have access to certain
secret and confidential business data and information belonging to the Company
including, but not limited to: marketing plans, financial strategies, market
surveys and assessments, customer and Company technical information, financial
statements, budget data, personnel records, customer profiles and purchase
requirements, product design, engineering and technical specifications, pricing
plans and strategies, sales contracts and proposals, private and confidential
discussions with executive managers, legal advice and strategies, performance
evaluations, price schedules from suppliers, litigation and planned litigation,
capital needs, lists of customers and potential customers, hiring and training
goals, internal operation and production reports and schedules, compensation
packages, customer account projections, licenses, promotional plans and
information, corporate policies for internal operations, bids and proposals by
suppliers and to customers, identities and personal profiles of key persons at
customers and potential customers, expense data by customer, and other
confidential and sensitive business information developed and maintained by the
Company.

 

J.      The Company has a valuable and proprietary interest in the confidential
information described in paragraph I above and has expended considerable time
and money to safeguard and protect such information from direct or indirect
divulgence of same by its employees and contractors, including the Consultant.
In addition, as part of the Company’s relationship with each of its customers,
the Company assures customers that the unique, confidential, and secret
information shared by customers with the Company will be protected from
disclosure to and unauthorized use by others. Any divulgence of such information
will constitute an irreparable injury to the Company and the Company’s
customers.

 

K.      The Consultant acknowledges that (i) the Consultant’s consulting with
the Company is one of great trust and confidence requiring that the Consultant
exercise a high degree of loyalty, honesty, and integrity, (ii) the Consultant
has and will receive substantial and adequate monetary consideration and
benefits pursuant to this Agreement, (iii) the Consultant has read and
understood the terms of this Agreement and signed same as a free and voluntary
act, (iv) the Consultant has freely chosen to enter into this Agreement because
of a desire to take advantage of the specific and unique opportunities offered
by the consulting arrangement with the Company and the benefits provided for
herein.

 

AGREEMENTS

 

In consideration of the Agreed Acknowledgments and the mutual covenants and
agreements set forth in this Agreement, the Parties agree as follows:

 

1.      Acknowledgments. The acknowledgments set forth above are accurate and
are hereby incorporated by reference in this Agreement.

 

2.      Engagement. The Company hereby engages the Consultant and the Consultant
hereby accepts the engagement with the Company on the terms and conditions set
forth in this Agreement.

 

3.      Consulting Services. During the Term (as defined below), the Consultant
will provide the following consulting services to the Company: research and
development, new product design and innovations, existing product enhancements
and improvements, and other technology advancements with respect to the Business
and the Products (the “Base Services”). The Consultant shall devote such time as
necessary to perform the Base Services hereunder, provided that, the Parties
acknowledge and agree that the Consultant shall not be required to devote more
than forty (40) hours per month during the Term hereof to the performance of the
Base Services under this Agreement. The time and place for the performance of
the Base Services hereunder shall be mutually agreed to by the Consultant and
the Company’s Chief Executive Officer (“CEO”) or Chief Operating Officer
(“COO”). During the Term hereof, the Company shall pay the Consultant an
annualized consulting fee (the “Base Fee”) of $30,000 per year, which shall be
payable in equal monthly installments in arrears.

 

 

 

 

4.      Additional Services. From time to time during the Term hereof, the
Consultant may provide consulting services beyond the Base Services (the
“Additional Services”), provided that the scope of Additional Services, the
additional consulting fees for such Additional Services (the “Additional Fee”),
the timing of the payment of the Additional Fee and any other terms and
conditions related to the Additional Services shall be mutually agreed to by the
Parties in writing. For purposes of this Agreement, the Base Services and the
Additional Services shall be referred to herein collectively as the “Services.”
It is the intention of the Parties that the Consultant may be engaged, as long
as mutually agreed to by the Parties, to provide Additional Services to the
Company with respect to the design, construction and mechanical systems
requirements (including, lighting, environmental control and air sanitation
systems) of indoor cultivation and agricultural facilities of the Company’s
customers and prospective customers. It is the further intention of the Parties
that the Consultant will provide consulting services directly to third parties
(including the Company’s customers and prospective customers) with respect to
the improvement, enhancement and optimization of growing conditions and related
crop yields and, that such consulting services shall fall outside the scope of
this Agreement. Except as set forth in Section 10 hereof, the Consultant may
provide consulting services to any third party without restriction.

 

5.      Term. This Agreement and the Consultant’s engagement shall be effective
as of the Effective Date and shall continue in full force and effect thereafter
until the third (3rd) anniversary of the Effective Date (the “Initial Term”),
and shall be automatically extended for a renewal term of one (1) additional
year (a “Renewal Term”) at the end of the Initial Term, and an additional one
(1) year Renewal Term at the end of each Renewal Term (the last day of the
Initial Term and each such Renewal Term is referred to herein as a “Term Date”),
unless either Party notifies the other Party of its non-renewal of this
Agreement not later than sixty (60) days prior to a Term Date by providing
written notice to the other Party of such Party’s intent not to renew, or if the
Consultant’s engagement is sooner terminated pursuant to Section 9. For purposes
of this Agreement, “Term” shall mean the actual duration of the Consultant’s
engagement, taking into account any extensions pursuant to this Section 5 or
early termination of the engagement pursuant to Section 8.

 

6.      Additional Compensation.

 

a.      Annual Incentive Bonus Program. The Consultant shall be eligible to
receive an annual incentive bonus (each an “Annual Incentive Bonus”) for each
completed calendar year during the Term in accordance with a bonus policy
adopted by the Company’s Board of Directors (the “Board”) (or an authorized
committee thereof). The bonus policy will provide that the Consultant shall be
entitled to earn an Annual Incentive Bonus for such calendar year based on
performance criteria determined in the sole discretion of the Board, with the
amount of any such Annual Incentive Bonus pro-rated for calendar year 2017 based
on the period from the Effective Date through December 31, 2017. The Annual
Incentive Bonus for a calendar year shall be paid as soon as practicable
following the end of the calendar year, but in no event later than March 15th of
the year following the year to which the Annual Incentive Bonus relates. Other
than as set forth in Section 10, the Consultant must be engaged as a consultant
hereunder by the Company or an affiliate of the Company on the date an Annual
Incentive Bonus is to be paid to be eligible to receive the Annual Incentive
Bonus for such calendar year. Payment of the Annual Incentive Bonus may be made
in the form of cash, Awards (as defined under and issued pursuant to the EIP),
or a combination thereof, as determined in the sole discretion of the Board (or
an authorized committee thereof). For purposes of this Agreement, “EIP” shall
mean the equity incentive plan, as may be adopted by the Board, as may be
modified and amended by the Company from time to time.

 

b.      Equity-Based Compensation. During the Term, the Consultant shall be
eligible to receive, Awards under and pursuant to the EIP, as determined by the
Board from time to time. Any Awards granted by the Board shall be subject to the
terms of the EIP, the terms and conditions established by the Board, and any
separate agreements to be executed by the Company and the Consultant with
respect to the grant of such Awards.

 

c.      Clawback. Notwithstanding any other provisions in this Agreement to the
contrary, any incentive-based compensation, or any other compensation, paid to
the Consultant pursuant to this Agreement or any other agreement or arrangement
with the Company which is subject to recovery under any law, governmental
regulation, or stock exchange listing requirement, will be subject to such
deductions and clawback as may be required to be made pursuant to such law,
government regulation or stock exchange listing requirement.

 

 

 

 

7.      Relationship.

 

a.      Independent Contractor Relationship. The Consultant understands and
agrees that, pursuant to this Agreement, the Consultant is an independent
contractor and not an employee of the Company or any of its affiliates or
subsidiaries, and is not and will not be entitled to any benefits provided by
the Company or any of its affiliates and subsidiaries to their respective
employees. The Consultant further understands and agrees that the Company shall
not withhold or contribute on behalf of the Consultant, and Consultant shall be
solely responsible for the payment of, any social security, social benefits,
unemployment compensation, worker’s compensation insurance premiums, taxes of
any kind, or any other contributions or payments required by governmental
authorities applicable to employees which arise out of or relate to the
performance of the Services hereunder by the Consultant. The Consultant
acknowledges and agrees that the Consultant shall have no authority to act or
incur obligations for or on behalf of the Company in any manner whatsoever
without the prior approval of the Company.

 

b.      Business Expense Reimbursement. The Company shall reimburse the
Consultant for reasonable expenses incurred by the Consultant in connection with
the performance of the Services pursuant to this Agreement, including, but not
limited to, travel expenses, professional conventions or similar professional
functions and other reasonable business expenses, provided that travel expenses
and any other expense in excess of $500 must be approved in advance by the
Company. The Consultant agrees to provide the Company with receipts and/or
documentation sufficient to permit the Company to take its full business expense
deduction. The Company shall have no obligation to reimburse the Consultant for
expenses claimed if the Consultant does not provide sufficient receipts and/or
documentation.

 

8.      Termination. Notwithstanding any other provision of this Agreement to
the contrary, during the Term, the engagement of the Consultant by the Company
shall terminate immediately upon the Consultant’s death, the Company shall have
the right to and may, in the exercise of its discretion, terminate the
Consultant’s engagement at any time by reason of Disability, or with Cause or
without Cause, the Consultant shall have the right to and may, in the exercise
of the Consultant’s discretion, resign the Consultant’s engagement for Good
Reason or without Good Reason (a “Voluntary Resignation”), subject to the
provisions set forth below:

 

a.      Death/Disability. The engagement of the Consultant by the Company shall
terminate immediately upon death of the Consultant or immediately upon the
giving of written notice by the Company to the Consultant of the Consultant’s
termination due to Disability. As used in this Agreement, “Disability” shall
mean the Consultant is unable to perform the Consultant’s duties hereunder due
to the onset of any sickness, injury or disability, even with reasonable
accommodation, for a consecutive period of one hundred eighty (180) days or an
aggregate of six (6) months in any twelve (12)-consecutive month period. A
determination of “Disability” shall be made by a physician satisfactory to both
the Consultant and the Company, provided that if the Consultant and the Company
do not agree on a physician, the Consultant and the Company shall each select a
physician and these two together shall select a third physician, whose
determination as to Disability shall be binding on all parties. The appointment
of one or more individuals to carry out the duties of the Consultant during a
period of the Consultant’s inability to perform such duties and pending a
determination of Disability shall not be considered a breach of this Agreement
by the Company.

 

b.      With Cause. The engagement of the Consultant by the Company shall
terminate at the election of the Company immediately upon the giving of written
notice by the Company to the Consultant of the Consultant’s termination with
Cause. For purposes of this Agreement, the term “Cause” means that the
Consultant: (i) has been convicted of, or entered a plea of guilty or “nolo
contendere” to, a felony (excluding any felony relating to the negligent
operation of an automobile), (ii) has failed to perform the Services under this
Agreement (other than by reason of illness or temporary disability), (iii) has
materially breached any non-competition or non-disclosure agreement in effect
between the Consultant and the Company, including such agreements in this
Agreement, (iv) has engaged in illegal conduct or gross misconduct that in any
case causes material financial harm to the Company, (v) has engaged in fraud or
material dishonesty in connection with the Business of the Company, (vi) has
engaged in willful misappropriation or embezzlement of any of the Company’s
funds or property, or (vii) has engaged in conduct that is detrimental to the
Business or reputation of the Company. Any of the aforesaid clauses (ii) through
(iii) may be cured by the Consultant, if curable, if cured within fifteen (15)
days after receipt by the Consultant of written notice of the same. In the event
such acts or omissions are capable of being cured, the effective date of
termination, in the event of the Consultant’s failure to cure, must be at least
fifteen (15) days after such notice of termination to afford the Consultant the
ability to cure the same. The Company may place the Consultant on paid leave for
up to sixty (60) consecutive days while it is determining whether there is a
basis to terminate Consultant’s engagement for Cause. This leave will not
constitute Good Reason.

 

 

 

 

c.      Without Cause. The engagement of the Consultant by the Company shall
terminate at the election of the Company upon written notice (or upon such later
date specified in such notice) to the Consultant without Cause.

 

d.      Voluntary Resignation. The engagement of the Consultant by the Company
shall terminate at the election of the Consultant upon thirty (30) days’ prior
written notice to the Company (which the Company may, in its sole discretion,
make effective earlier than any notice date) for a Voluntary Resignation. The
Consultant’s Voluntary Resignation may be for “Good Reason” if, other than to
the extent the cause of the event is primarily the result of Consultant’s
voluntary actions or omissions in providing services hereunder, (i) the Company
commits a material breach of its obligations under this Agreement, (ii) a
material change of the principal location in which Consultant is required to
perform the Services Consultant hereunder on a regular basis more than 50 miles
from its current location without the Consultant’s prior consent, or (iii) a
failure to pay the Consultant’s Base Fee or Additional Fee to which the
Consultant is entitled under this Agreement. The Consultant will provide written
notice to the Company of the existence of any event or condition that
constitutes Good Reason within ninety (90) days of its existence. Upon receipt
of such notice, the Company shall have a period of thirty (30) days during which
it may remedy such event or condition that constitutes Good Reason (the “Cure
Period”). Notwithstanding any other provision herein, the Consultant’s
termination of engagement shall not constitute termination with Good Reason
unless such termination occurs within sixty (60) days following the last day of
the Cure Period.

 

e.      Non-renewal. The Consultant’s engagement shall terminate at a Term Date
if either the Consultant or the Company notifies the other Party of its
non-renewal of this Agreement not later than sixty (60) days prior to such Term
Date by providing written notice to the other Party of such Party’s intent not
to renew.

 

f.      Notice of Termination. Any termination of the Consultant’s engagement by
the Company or by the Consultant (other than termination pursuant to Death)
shall be communicated by written Notice of Termination to the other Party hereto
in accordance with this Agreement. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Consultant’s engagement under the provision so indicated.

 

g.      Date of Termination. The “Date of Termination” shall mean the date the
Consultant’s engagement is terminated in accordance with this Section 8.

 

9.      Effects of Termination.

 

a.      Death/Disability. If the engagement of the Consultant should terminate
during the Term due to the Consultant’s death, of if the engagement of the
Consultant should terminate during the Term at the election of the Company due
to Disability, then the Company will pay to the Consultant or, in the event of
the Consultant’s death, to the estate of the Consultant:

 

i.      Any earned and accrued but unpaid Base Fee or Additional Fee through the
Date of Termination;

 

ii.      reimbursement for any unreimbursed business expenses incurred through
the Date of Termination in accordance with Section 7(b) (collectively, Sections
9(a)(i)-(ii), payable in accordance with this Section 9(a), shall be hereafter
referred to as the “Accrued Benefits”);

 

iii.      subject to Section 9(e), continued payment of the Consultant’s Base
Fee for a period equal to the lesser of ninety (90) days from the Date of
Termination or the then applicable Term Date (the “Death/Disability Benefit”);
provided that, the first payment of the Death Benefit shall be made on the
sixtieth (60th) day after the Date of Termination, and will include payment of
any amount of the Death/Disability Benefit that was otherwise due prior thereto;
and

 

iv.      any accrued but unpaid Annual Incentive Bonus for the year prior to the
year of termination, payable when the applicable Annual Incentive Bonus for such
year would have otherwise been paid.

 

 

 

 

b.      Termination by the Company without Cause or Voluntary Resignation by the
Consultant for Good Reason. If the engagement of the Consultant should terminate
at the election of the Company without Cause or at the election of the
Consultant due to a Voluntary Resignation for Good Reason, the Company shall pay
or provide to the Consultant the Accrued Benefits, and, subject Sections 9(e)
and 10:

 

i.      continued payment of the Consultant’s Base Fee through the first
anniversary of the Date of Termination or the then applicable Term Date,
whichever occurs first, payable in equal monthly installments in arrears (the
“Severance Payments”); provided that, the first payment of the Severance
Payments shall be made on the sixtieth (60th) day after the Date of Termination,
and will include payment of any amount of the Severance Payments that were
otherwise due prior thereto;

 

ii.      reimbursement for any unreimbursed business expenses incurred through
the Date of Termination in accordance with Section 7(b); and

 

iii.      any accrued but unpaid Annual Incentive Bonus for the year prior to
the year of termination, payable when the applicable Annual Incentive Bonus for
such year would have otherwise been paid.

 

c.      By the Company For Cause; Voluntary Resignation by the Consultant
without Good Reason; Non-Renewal by the Consultant. In the event that the
Consultant’s engagement is terminated during the Term by the Company for Cause,
a Voluntary Resignation by the Consultant without Good Reason, or the
non-renewal of the Initial Term or any Renewal Term by the Consultant, the
Company shall pay or provide to the Consultant only the Accrued Benefits, and
the Company shall have no further obligations to the Consultant under this
Agreement.

 

d.      Non-Renewal by the Company. In the event that the Consultant’s
engagement is terminated by the non-renewal of the Initial Term or any Renewal
Term by the Company, then the Company shall pay to the Consultant:

 

i.      the Accrued Benefits; and

 

ii.      any accrued but unpaid Annual Incentive Bonus for a prior fiscal year,
payable when such Annual Bonus would have otherwise been paid.

 

e.      Release. Any payments by the Company required under Sections 9(a)(iv),
(vi) and (vii) and Sections 9(b)(i), (iv) and (v) shall be conditioned on and
shall not be payable unless the Company receives from the Consultant (or, in the
event of the Consultant’s death, the estate of the Consultant) within sixty (60)
days of the Date of Termination a fully effective and non-revocable written
release in form and substance reasonably acceptable to the Company of any and
all past, present or future claims that the Consultant (or, in the event of the
Consultant’s death, the estate of the Consultant) may have against the Company
or any of its affiliates and any of their respective officers, directors and
other related parties (all claims released in this Section 9(e) being referred
to as the “Released Claims”). The Company agrees to provide a form of release
within seven (7) days of the Date of Termination.

 

f.      Termination of Authority. Immediately upon the Consultant terminating or
being terminated from the Consultant’s engagement with the Company for any
reason, notwithstanding anything else appearing in this Agreement or otherwise,
the Consultant will stop providing the Services.

 

10.      Activity Restrictions; Consultant Covenants.

 

a.      Purpose. As previously acknowledged, the Company has invested heavily in
its information systems, personnel, product development, customers, and customer
development. As a consultant, the Consultant is entrusted with the fruits of
these investments and the decisions to be made regarding similar future
investments. In order to provide the Services and receive the compensation
hereunder, the Company requires a written commitment from key consultants that
its trust will not be misplaced and its investments lost or damaged.
Accordingly, the Consultant makes the following promises regarding the
Consultant’s activities.

 

 

 

 

b.      Best Efforts. The Consultant will at all times perform the Services to
the best of the Consultant’s ability pursuant to the express and implicit terms
of this Agreement to the reasonable satisfaction of the Company. During
engagement, the Consultant will not engage in or become interested in any
calling, activity, or other business which is or may be contrary to or in
competition with the Business.

 

c.      Inventions; Intellectual Property.

 

i.      Inventions. Every invention and improvement conceived, invented or
developed by the Consultant relating to or useable in the Business then being
carried on or actively contemplated by the Company now existing or hereafter
developed shall become the exclusive property of the Company. With respect to
all inventive ideas originated or developed by the Consultant which relate to
the Business during the Term hereof, or as to which the Consultant has acquired
information as a result of the Consultant’s engagement with the Company, and all
patents obtained on such inventive ideas, (a) the Consultant agrees to disclose
and assign, without charge, all such inventive ideas and any patents obtained
thereon to the Company, but without expense to the Consultant, (b) the
Consultant agrees that all such inventive ideas and any patents thereof shall be
the exclusive property of the Company, and (c) the Consultant will, at any and
all times, furnish such information and assistance and execute such applications
and other documents as may be advisable in the opinion of the Company to obtain
both domestic and foreign patents, title to which is to be vested in the
Company, and the Consultant shall give the Company the full and exclusive power
to prosecute all such applications and all proceedings in connection therewith.

 

ii.      Intellectual Property. The Consultant shall promptly disclose to the
Company or any successor or assign, and grant to the Company or its successors
and assigns without any separate remuneration or compensation other than that
received by the Consultant in the course of the Consultant’s engagement, the
Consultant’s entire right, title and interest in and to any and all inventions,
developments, discoveries, models, or business plans or opportunities, or any
other intellectual property of any type or nature whatsoever related to the
Business or the Products (“Intellectual Property”), developed by the Consultant
during the period of the Consultant’s engagement by the Company or its
affiliates and whether developed by the Consultant during or after business
hours, or alone or in connection with others, that is in any way related to the
Business of the Company, its successors or assigns. This provision shall not
apply to books or articles authored by the Consultant during non-work hours,
consistent with the Consultant’s obligations under this Agreement, so long as
such books or articles (a) are not funded in whole or in part by the Company,
and (b) do not contain any confidential information or Intellectual Property of
the Company. The Consultant agrees, at the Company’s expense, to take all steps
necessary or proper to vest title to all such Intellectual Property in the
Company, and cooperate fully and assist the Company in any litigation or other
proceedings involving any such Intellectual Property.

 

d.      Non-solicitation of Business. During the Term hereof and for a period of
one (1) year after the termination or expiration of this Agreement, regardless
of who initiated the termination, the Consultant will not, directly or
indirectly, solicit, interfere with, or divert away from the Company any
customer of the Company who did any business with the Company during the Term
hereof.

 

e.      Non-enticement of Personnel. During the Term hereof and for a period of
one (1) year after the termination or expiration of this Agreement, regardless
of who initiated the termination, the Consultant shall not, directly or
indirectly, as an individual or on behalf of any other person or entity, hire,
solicit, recruit, or attempt to entice away from the Company or any customer of
the Company any person employed by or providing services to the Company or any
customer of the Company. The Consultant shall not approach any such employees
for such a prohibited purpose and shall not knowingly cooperate in any other
person or entity’s efforts to do so. The Company’s customers are third-party
beneficiaries of this covenant and shall have standing to enforce the terms of
this Section 10(e) by seeking whatever equitable and legal remedies may be
available to the Company hereunder.

 

f.      Confidentiality. The Consultant shall not at any time during the Term
hereof or at any time thereafter communicate, divulge, disclose, take, or use
for himself any information, knowledge, data, or materials that were disclosed
or obtained by the Consultant during the Term (including, without limitation,
any information and knowledge that was conceived, created, or developed by the
Consultant during the course of the Consultant’s engagement with the Company)
which is related to the Business and the Products and is not already generally
known in the Company’s trade by competitors. This restriction on confidential
information disclosure and use shall apply to knowledge or information which
relates to the Business or the business of the Company’s customers and is in the
nature of a business secret of the Company or the Company’s customers. Included
within the scope of this restriction shall be the specific items identified in
Section 10(h) hereof and any other information and matters designated by the
Company (verbally or in writing) to be confidential during the Term hereof. The
Company’s customers are third-party beneficiaries of the aforestated covenants
in this Section 10(f) and shall have standing to enforce its terms and seek
whatever equitable or legal remedy that is necessary to repay or avoid harm to
them, including, but not limited to, any remedy available to the Company under
this Agreement. The obligations of the Consultant with respect to the disclosure
and use of confidential information under this Section 10(f) shall cease to the
extent such information becomes generally known in the Company’s trade by
competitors through a means other than a breach of this Agreement by the
Consultant. In the event the Consultant is required by any legal proceedings to
disclose confidential information, the Consultant shall provide the Company with
prompt notice thereof so that the Company may seek an appropriate protective
order and/or waive compliance by the Consultant with the provisions hereof.

 

 

 

 

g.      Non-competition. During the Term hereof and for a period of one (1) year
after the termination or expiration of this Agreement, regardless of who
initiated the termination, the Consultant shall not, alone, or as an agent,
employee, servant, officer, partner or stockholder of any other corporation or
business, directly or indirectly, engage in employment or business activity
which relates to the sale, manufacturing, or marketing of products which are
competitive with, substantially similar to, or serve the same function as the
Products manufactured, marketed or sold by the Company either now or at any time
during the Term. This post-termination restriction is limited to activities in
or directed at the geographic area located in North America where the Company
has sold or manufactured the Products at any time during the Term hereof. The
Consultant specifically agrees, without limitation, that the Consultant will not
accept a similar position or perform the same or similar responsibilities or
services as performed for the Company for any business entity that is engaged a
business that is the same, or substantially similar to, the Business (i.e., a
competitor).

 

h.      Return of Company Materials. Upon request at any time during the Term
hereof and without request at the time of the termination or expiration of this
Agreement, without regard for who initiated the termination, the Consultant
agrees to promptly return (without retaining any copies, summaries, files or
notes derived from source materials) all information and records regarding the
Business and the Products, whether or not created by the Consultant during the
Term hereof including, but not be limited to: all financial, sales and purchase
data for the Business and the Company’s customers, all financial statements and
projections, all marketing surveys and analyses, all strategic planning
material, all data on the Company’s competitors, all customer information, all
records regarding prospective customers of the Company, all documents regarding
pending or threatened litigation involving the Company, all legal opinions, all
personnel evaluations for the Company’s employees and outside vendors and
contractors, all computer hardware and software, all price lists and formulas,
all pricing quotations or proposals, all lists or compilations of customers and
prospects, all promotional materials, all internal operating reports, all
budgets and projections, all information related to the Company’s product
development and intellectual property, all product designs, specifications,
drawing, engineering, bills of material and other information related to the
Products, all corporate and equipment manuals and policies, all contracts with
customers and suppliers, all supplier prices and quotations, all business
correspondence, all catalogs and product samples, all sensitive customer
information, all sales reports and invoices, and all tangible and intangible
property owned by the Company.

 

i.      Non-Disparagement. During the Term and thereafter, the Consultant shall
not knowingly, directly or indirectly, make negative comments or otherwise
disparage the Company, any of its affiliates, or any of their respective
officers, directors, employees, shareholders, agents or businesses in any manner
likely to be harmful to them or their business reputations or personal
reputations. The Company shall direct its senior management team to not
disparage or encourage or induce others to disparage the Consultant. The
foregoing shall not be violated by truthful statements in response to legal
process, required governmental testimony or filings, or administrative or
arbitral proceedings (including depositions in connection with such
proceedings); provided that the Consultant has given the Company prompt written
notice of any such legal process and cooperated with the Company’s efforts to
seek a protective order.

 

 

 

 

j.      Consultant’s Representations. The Consultant represents and acknowledges
that none of the activity restrictions set forth in this Section 10 will prevent
the Consultant from obtaining employment, cause undue hardship, cause a
relocation, or adversely impact numerous other business and employment
opportunities that are not affected by the existence of these restrictions. The
Consultant further acknowledges that the Consultant believes the foregoing
restrictions to be reasonable and necessary to protect the Company’s legitimate
business interests. Any violation of the restrictions in this Section 10 can
cause harm to the Company of an irreparable nature for which money damages alone
will not suffice. The Consultant agrees that the Consultant will fully and
promptly disclose to any person or entity with which the Consultant becomes
associated subsequent to the termination or expiration of this Agreement all of
the restrictions on the Consultant’s post-termination activities. The Company
shall also have the right to disclose this Agreement to any business entity
hiring or utilizing the services of the Consultant subsequent to the termination
or expiration of this Agreement.

 

k.      Common Law and Trade Secrets. The Consultant and the Company agree that
nothing in this Agreement shall be construed to limit or negate the common law
of torts or trade secrets where it provides the Company with broader protection
than that provided herein.

 

l.      Tolling. In the event of any violation of the provisions of this Section
10, the Consultant acknowledges and agrees that the post-termination
restrictions contained in this Section 10 shall be extended by a period of time
equal to the period of such violation, it being the intention of the Parties
hereto that the running of the applicable post-termination restriction period
shall be tolled during any period of such violation.

 

m.      Rights and Remedies upon Breach. The Consultant acknowledges and agrees
that any breach by the Consultant of any of the provisions of Section 10 (the
“Restrictive Covenants”) would result in irreparable injury and damage for which
money damages would not provide an adequate remedy. Therefore, if the Consultant
breaches, or threatens to commit a breach of, any of the provisions of the
Restrictive Covenants, the Company and its affiliates shall have the following
rights and remedies, each of which rights and remedies shall be independent of
the other and severally enforceable, and all of which rights and remedies shall
be in addition to, and not in lieu of, any other rights and remedies available
to the Company and its affiliates, under law or in equity (including, without
limitation, the recovery of damages):

 

i.      the right and remedy to have the Restrictive Covenants specifically
enforced (without posting bond and without the need to prove damages) by any
court of competent jurisdiction, including, without limitation, the right to an
entry against the Consultant of restraining orders and injunctions (preliminary,
mandatory, temporary and permanent) against violations, threatened or actual,
and whether or not then continuing, of such covenants; and

 

ii.      the right and remedy to require the Consultant to account for and pay
over to the Company or any of its affiliates all compensation, profits, monies,
accruals, increments or other benefits (collectively, “Benefits”) derived or
received by the Consultant as the result of any transactions constituting a
breach of the Restrictive Covenants, and the Consultant shall account for and
pay over such Benefits to such member of Company Group and, if applicable, its
affected affiliates.

 

11.      Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Company’s successors and assigns and the Consultant’s
personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees. This Agreement shall not be assignable by
the Consultant, it being understood and agreed that this is a contract for the
Consultant’s personal services. This Agreement shall not be assignable by the
Company, except that the Company may assign it to an affiliate of the Company
and shall assign it in connection with a transaction involving the succession by
a third party to all or substantially all of the Company’s business and/or
assets (whether direct or indirect and whether by purchase, merger,
consolidation, liquidation or otherwise). When assigned to a successor, the
assignee shall assume this Agreement and expressly agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform it in the absence of such an assignment and the Company
shall be released of all obligations hereunder. For all purposes under this
Agreement, the term “Company” shall include any successor to the Company’s
business and/or assets that executes and delivers the assumption agreement
described in the immediately preceding sentence or that becomes bound by this
Agreement by operation of law. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns as provided
in this Section 11 and is not for the benefit of, nor may any provision hereof
be enforced by, any other person, except as otherwise set forth in this
Agreement.

 

 

 

 

12.      Alternative Dispute Resolution.

 

a.      Coverage. Except as otherwise expressly provided in this Agreement or by
law, this Section 12 is the sole and exclusive method by which the Consultant
and the Company are required to resolve any and all disputes arising out of or
related to the Consultant’s engagement with the Company or the termination of
that engagement, each of which is referred to as “Dispute,” including, but not
limited to, disputes arising out of or related to any of the following subjects:
(i) compensation or other terms or conditions of the Consultant’s engagement,
(ii) any disciplinary action or other adverse decision of the Company or any
statement related to the Consultant’s engagement, performance or termination,
(iii) any policy of the Company or any agreement between the Consultant and the
Company, , or (iv) any other dispute arising out of or related to the
Consultant’s engagement or the Consultant’s termination.

 

b.      Negotiation; Mediation. Any Dispute asserted by one Party against the
other Party shall be delivered in writing to the other Party. During the fifteen
(15)-day period following receipt of the assertion by the other Party, the
Parties shall attempt in good faith to negotiate a resolution of the Disputes so
asserted. If the Disputes so asserted cannot be settled through negotiation and
remains unresolved after the fifteen (15)-day negotiation period, the Consultant
or the Company may submit the dispute to mediation and the Parties shall attempt
in good faith to resolve the dispute by mediation, under the mediation procedure
of the American Arbitration Association (“AAA”). Unless the Parties agree
otherwise in writing, the mediation shall be conducted by a single mediator, and
the mediator shall be selected from an appropriate AAA panel pursuant to the AAA
rules, respectively. The mediation shall be conducted in Denver, Colorado.
Unless the Parties agree otherwise, the cost of the mediator’s professional fees
and expenses and any reasonable administrative fee will be shared and paid
equally by the Parties, and each Party shall bear its own attorneys’ fees and
costs of the mediation.

 

c.      Binding Arbitration. If the Disputes so asserted cannot be settled
through mediation and remains unresolved thirty (30) days after the appointment
of a mediator, the Consultant or the Company may submit the dispute to
arbitration and the dispute shall be settled in arbitration. Notice of a demand
to arbitrate a dispute by either Party shall be given in writing to the other at
their last known address. Arbitration shall be commenced by the filing by a
party of an arbitration demand with the AAA in its office in Denver, Colorado.
The arbitration and resolution of the dispute shall be resolved by a single
arbitrator appointed by the AAA pursuant to AAA rules. The arbitration shall in
all respects be governed and conducted by applicable AAA rules, and any award
and/or decision shall be conclusive and binding on the parties. The arbitration
shall be conducted in Denver, Colorado regardless of the particular plant or
facility of the Parties. The arbitrator shall supply a written opinion
supporting any award, and judgment may be entered on the award in any court of
competent jurisdiction. Each Party shall pay its own fees and expenses for the
arbitration except for any costs and charges imposed by the AAA which may be
assessed against the losing Party by the arbitrator. Any fees of the arbitrator
for the arbitrator’s services shall in all events be shared and paid equally by
the Parties.

 

d.      Equitable Relief. In the event that preliminary or permanent injunctive
relief is necessary or desirable in order to prevent a Party from acting
contrary to this Agreement or to prevent irreparable harm prior to a
confirmation of an arbitration award, including without limitation as provided
under Section 13(h) hereof, then either Party is authorized and entitled to
commence a lawsuit solely to obtain equitable relief against the other pending
the completion of the arbitration in a court having jurisdiction over the
Parties. All rights and remedies of the parties shall be cumulative and in
addition to any other rights and remedies obtainable from arbitration.

 

e.      Severability. In the event that any court or arbitrator finds or holds
any restriction contained in this Agreement, including the Restrictive
Covenants, to be unreasonable, invalid, or unenforceable, then it is the express
intent of the Parties that the court or arbitrator so holding shall modify or
amend the offending restriction or restrictions in any reasonable fashion so as
to render it or them enforceable to the fullest extent possible under prevailing
law. In the event that any restriction is deemed void and unenforceable and not
suitable or capable of being so modified, then such restriction shall be
severed. Each term and provision of this Agreement is and shall be construed as
severable in whole or in part, and, if any provision or the application thereof
to particular circumstances should be invalid, illegal, or unenforceable, then
the remaining terms and provisions shall not be affected and shall remain fully
enforceable. An adjudication or finding of invalidity or unenforceability for
one jurisdiction of any particular provision shall not invalidate or void such
provision in any other jurisdiction. It is the express intent of the Parties
that all restrictions imposed by this Agreement be construed and applied to
avoid legal nullities and with a view towards enforcement whenever possible

 

 

 

 

13.      Miscellaneous.

 

a.      Time of the Essence. Time is of the essence with respect to this
Agreement. If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall not be a business day
(i.e, a Saturday, Sunday or federal holiday), then such action may be taken or
such right may be exercised on the next succeeding business day.

 

b.      Entire Agreement. This Agreement constitutes the entire understanding or
agreement between the Company and the Consultant relating to the subject matter
hereof and there is no understanding or agreement, oral or written, which is not
set forth herein. This Agreement may only be amended by a writing signed by the
Company and the Consultant.

 

c.      Waiver. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed by the Parties. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any Party to exercise
any right hereunder in any manner impair the exercise of any such right.

 

d.      Construction. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement. The Parties agree that each of them and/or their respective
counsel have reviewed and had an opportunity to revise this Agreement and,
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting Party shall not be employed in the
interpretation of this Agreement or any amendments thereto. The word “including”
shall be construed to include the words “without limitation.” In this Agreement,
unless the context otherwise requires, references to the singular shall include
the plural and vice versa. The word “Company” shall be construed to include the
Company and its subsidiaries and affiliates, whether now existing or hereafter
established.

 

e.      Notices. All notices and other communications hereunder shall be in
writing, and shall be deemed to have been duly given if delivered personally or
if sent by overnight courier or by certified mail, return receipt requested,
postage prepaid, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication shall have specified in
writing to the other Party hereto, in accordance with this Section 13(e).

 

  i. If to the Company: Surna, Inc.       1780 55th Street, Suite A      
Boulder, Colorado 80301       Attention: CEO

 

ii. If to the Consultant, at the Consultant’s last residence shown on the
records of the Company.

 

f.      Public Announcements. The Company intends to publicly announce and
disclose this Agreement and the subject matter hereof in accordance with
applicable laws. Until such time as the Company has publicly announced and/or
disclosed this Agreement and the subject matter hereof, the Consultant shall not
publicly announce or disclose to any third party the existence of this Agreement
or the subject matter hereof.

 

g.      Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Colorado, without regard to the principles of conflicts of law thereof.

 

h.      Equitable Relief. The Consultant acknowledges and agrees that,
notwithstanding anything herein to the contrary, including without limitation
Section 12(d) hereof, upon any breach by the Consultant of the Consultant’s
obligations under Section 10, the Company will have no adequate remedy at law,
and accordingly shall be immediately entitled to specific performance and other
appropriate injunctive and equitable relief in a court of competent
jurisdiction.

 

 

 

 

i.      Cooperation in Future Matters. The Consultant hereby agrees that for a
period of eighteen (18) months following the Consultant’s termination of
engagement, the Consultant shall cooperate fully with the Company’s reasonable
requests relating to matters that pertain to the Consultant’s engagement by the
Company, including, without limitation, providing information or limited
consultation as to such matters, participating in legal proceedings,
investigations or audits on behalf of the Company, or otherwise making himself
reasonably available to the Company for other related purposes. Any such
cooperation shall be performed at scheduled times taking into consideration the
Consultant’s other commitments. The Consultant shall not be required to perform
such cooperation to the extent it conflicts with any requirements of exclusivity
of services for another employer or otherwise, nor in any manner that in the
good faith belief of the Consultant would conflict with the Consultant’s rights
under or ability to enforce this Agreement.

 

j.      Indemnity. Each Party shall indemnify and hold the other Party harmless
from and against all claims, losses, liabilities (including negligence, tort and
strict liability), damages, judgments, suits, and all legal proceedings, and any
and all costs and expenses in connection therewith (including reasonable
attorneys’ fees) arising out of any breach of this Agreement or in any manner
connected with their obligations, or the Services provided by the Consultant,
under this Agreement, including, without limitation, any violation of any
applicable laws or claims for injury to or death of persons or for damage to
property. Each Party agrees to give the other Party prompt notice of any such
claim or liability.

 

k.      Survival. Notwithstanding anything in this Agreement or elsewhere to the
contrary, the provisions of Sections 9, 10, 11, 12 and 13 shall survive the
termination of the Consultant’s engagement or this Agreement.

 

l.      Execution and Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. ESIGN Act of 2000, e.g., www.docusign.com) or
other transmission method and any counterpart so delivered shall be deemed to
have been duly and validly delivered and be valid and effective for all
purposes.

 

[Remainder of this page intentionally left blank. Signature page follows.]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written below.

 

CONSULTANT   COMPANY             Surna, Inc.         By: /s/ Stephen Keen   By:
/s/ Trent Doucet   Stephen Keen, Individually     Trent Doucet, Chief Executive
Officer