EMPLOYMENT AGREEMENT

This Employment Agreement (this “ Agreement ”) is made and entered into effective as of May 29, 2018 (the “ Effective Date ”) by and between Surna Inc. , a Nevada corporation whose address is 1780 55th Street, Boulder, Colorado 80301 (the “ Company ”) and Brandy M. Keen , an adult resident of the State of Colorado (the “ Employee ”). The Employee and the Company may be referred to herein individually as a “ Party ” or collectively as the “ Parties .”

AGREED ACKNOWLEDGMENTS

A.       This Agreement amends and restates that certain Employment Agreement by and between the Company and the Employee dated October 10, 2017 (the “ Original Agreement ”) and, upon execution of this Agreement, this Agreement supersedes and replaces the Original Agreement, and the Original Agreement shall have no further force or effect.

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

C.       In connection with the Business, the Company manufactures or is developing, sells and delivers the following products and services: (i) liquid-based process cooling and climate control systems, (ii) a full-service engineering package for designing and engineering commercial scale thermodynamic systems specific to indoor cultivation facility conditions, (iii) automation and control devices, systems and technologies used for environmental and climate control in indoor cultivation facilities, (iv) a comprehensive, hybrid cultivation facility design and building 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 ”)

D.       The Business of the Company is highly competitive and requires the creation of intimate and prolonged relationships with the Company’s customers because of the custom products developed for individual customers, and the significance of adapting to the marketing plans continually being created by these customers.

E.       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.

F.       The Company desires to retain the services of the Employee as a member of the Company’s management team. The Employee desires to continue such employment and commits to devote all of the Employee’s business time and attention to services benefiting the Company. Both the Employee and the Company wish to enter into this Agreement to set forth the terms and conditions of the Employee’s employment with the Company.

G.       The Employee acknowledges that, in connection with the execution of this Agreement, the Employee is receiving new and valuable consideration from the Company including, without limitation, an award of restricted stock units under the Company’s 2017 Equity Incentive Plan, as may be modified and amended by the Company from time to time (the “ EIP ”), pursuant to Section 7(c) hereof.

H.       The Employee acknowledges that, in the course of the Employee’s employment with the Company, the Employee has and will frequently come into contact with the Company’s customers and suppliers to such an extent that the Employee 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 Employee not to disrupt or otherwise misappropriate the customer and supplier relationships developed and/or supported by the Company.

I.       The Employee has had and will have, during the course of the Employee’s employment with the Company, frequent and close contact with the Company’s other executive managers, salespeople, and key staff employees. As a result of the Employee’s position, the Employee 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.

J.       The Employee acknowledges that, by virtue of the Employee’s position with the Company, the Employee will 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.

K.       The Company has a valuable and proprietary interest in the confidential information described in paragraph J above and has expended considerable time and money to safeguard and protect such information from direct or indirect divulgence of same by its employees, including the Employee. 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.

L.       The Employee acknowledges that (i) the Employee’s position with the Company is one of great trust and confidence requiring that the Employee exercise a high degree of loyalty, honesty, and integrity, (ii) the Employee has and will receive substantial and adequate monetary consideration and benefits pursuant to this Agreement, (iii) the Employee has read and understood the terms of this Agreement and signed the same as a free and voluntary act, and (iv) the Employee understands that there is no need to continue employment with the Company, but the Employee has freely chosen to enter into this Agreement because of a desire to take advantage of the specific and unique opportunities offered by continued employment with the Company and the additional 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.        Employment and Duties . The Company hereby employs the Employee and the Employee hereby accepts employment with the Company on the terms and conditions set forth in this Agreement. During the Term (as defined below), the Employee shall be employed by the Company as a Senior Technical Advisor and, as such, the Employee shall have such responsibilities and authority as are customary for such position of a company of similar size and nature as the Company as may be assigned from time to time, including, without limitation, serving as the technical advisor to the Company’s sales representatives, providing technical support to assess and develop scope of work, solutions and technical requirements for customer and prospective customer projects, assisting the Company in securing Product sales, serving as technical advisor to the Company’s engineering and product development teams, and providing input and direction for the product development and overall engineering focus for the Company. The Employee shall faithfully perform for the Company the duties of such position and shall report directly to the Vice President – Sales and Project Management. At all times during the Term, the Employee shall adhere to all of the Company’s policies, rules and regulations governing the conduct of its employees, including without limitation, any compliance manual, code of ethics, employee handbook or other policies adopted by the Company from time to time.

3.        Extent of Services .

a.        Full-time Employment . Commencing on the Effective Date and continuing through April 30, 2019, except for illnesses and vacation periods, the Employee shall be a full-time employee of the Company and shall devote the Employee’s full business time and attention and the Employee’s best efforts to the performance of the Employee’s duties and responsibilities under this Agreement.

b.        Part-time Employment . Commencing on May 1, 2019 and continuing through the Term Date (as defined below), the Employee shall become a part-time employee of the Company and be expected to devote a minimum of thirty (30) hours per week, except for illness and vacation periods, to the performance of the Employee’s duties and responsibilities under this Agreement.

c.        Permitted Activities . During the Employee’s full- and part-time employment with the Company, the Employee may participate in charitable, academic, community religious or other non-profit activities, and in trade or professional organizations, and engage and participate in the specific activities listed in Exhibit A hereto (the “ Permitted Activities ”) or such other activities as specifically agreed to in writing by the Company in advance from time to time in the Company’s sole discretion, provided that all of the Employee’s activities outside of the Employee’s duties to the Company, individually or in the aggregate, shall comply with the Company’s conflict of interest policies and corporate governance guidelines as in effect from time to time, do not otherwise interfere with the Employee’s duties and responsibilities to the Company, and do not compete with or adversely affect the Business of the Company. Subject to the provisions of Section 11 herein, the Employee may make any passive investment in any publicly traded entity, or own five percent (5%) or less of the issued and outstanding voting securities of any entity, provided, in any event, that the Employee is not obligated or required to, and shall not in fact, devote any consulting or managerial effort or services in connection therewith, except for the Permitted Activities.

4.        Place of Performance . Commencing on the Effective Date and continuing through April 30, 2019, the Employee will perform the Employee’s duties for the Company from the Company’s corporate offices in Boulder, Colorado, except that the Employee will travel to perform services as required for the proper performance of the Employee’s duties under this Agreement. Commencing on May 1, 2019 and continuing through the Term Date, the Employee may relocate her residence and will only be expected to attend significant trade shows, major customer meetings, or meetings at the Boulder office from time to time. The Company shall not be responsible for any relocation costs, but the Company would continue to reimburse the Employee for reasonable business and travel expenses pursuant to Section 8(d) hereof.

5.        Term . This Agreement and the Employee’s employment hereunder shall commence on the Effective Date and shall continue in full force and effect until April 30, 2020 (the “ Term ”)(the last day of the Term is referred to herein as a “ Term Date ”). For purposes of this Agreement, “ Term ” shall mean the actual duration of the Employee’s employment hereunder, taking into account any early termination of employment pursuant to Section 8 hereof.

6.        Compensation .

a.        Salary . Commencing on the Effective Date and continuing through April 30, 2019, the Company shall pay the Employee an annualized base salary (the “ Base Salary ”) of $150,000 per year, which shall be payable in equal installments in accordance with the Company’s standard payroll practice from time to time, less customary or legally required withholdings and deductions, for periods actually worked by the Employee. Commencing on May 1, 2019 and continuing through the Term Date, the Base Salary shall be reduced to $75,000 per year to reflect the Employee’s part-time employment.

b.        Sales Incentive Program . Commencing on the Effective Date and continuing through April 30, 2019, the Employee shall be eligible to participate in the Company’s sales incentive program for sales personnel, as in effect and as amended from time to time by the Company (the “ Sales Program ”). In connection with the Sales Program, commencing on the Effective Date and continuing through April 30, 2019, the Employee will be entitled to a sales incentive equal to one-quarter of one percent (0.25%) of the net revenue collected and earned from Products sales originated by the Employee and any other salesperson employed by the Company, payable quarterly in arrears (the “ Sales Incentive ”). The Company and the Employee acknowledge and agree that the Sales Program, the Sales Incentive and any other sales incentives and commissions will terminate effective May 1, 2019.

c.        Restricted Stock Units . Upon execution of this Agreement or as soon as practicable thereafter, the Company shall grant 4,800,000 Restricted Stock Units (as defined in the EIP) to the Employee, which shall be subject to the terms of the EIP and a separate Restricted Stock Unit Agreement to be executed by the Company and the Employee, substantially in the form attached hereto as Exhibit B (the “ Restricted Stock Unit Agreement ”). The Restricted Stock Units shall be valued at Fair Market Value (as defined in the EIP) on the date such Restricted Stock Units vest and, upon vesting, the Employee will receive one share of the Company’s common stock (“ Common Stock ”) for each vested Restricted Stock Unit (with no cash purchase price to be paid by the Employee for such share of Common Stock). As a condition to the Company’s obligations with respect to the Restricted Stock Units (including, without limitation, any obligation to deliver any shares of Common Stock upon vesting of the Restricted Stock Units, including vesting upon a Change of Control, as defined below), the Employee shall be responsible for, and shall make arrangements satisfactory to the Company to pay to the Company, within fifteen (15) of the Company’s delivery of written notice of the amount of such payment, any federal, state, local, or foreign taxes of any kind required to be withheld with respect to the delivery of shares of Common Stock corresponding to such Restricted Stock Units. Subject to the provisions of Sections 9(a)(v), 9(b)(ii), 9(c) and 9(d)(ii), the Restricted Stock Units shall vest as follows:

i.       1,000,000 Restricted Stock Units shall vest on June 30, 2018, subject to the Employee’s continued employment through the vesting date;

ii.       1,000,000 Restricted Stock Units shall vest on December 31, 2018, subject to the Employee’s continued employment through the vesting date;

iii.       1,000,000 Restricted Stock Units shall vest on June 30, 2019, subject to the Employee’s continued employment through the vesting date;

iv.       1,000,000 Restricted Stock Units shall vest on December 31, 2019, subject to the Employee’s continued employment through the vesting date; and

v.       800,000 Restricted Stock Units shall vest on April 30, 2020, subject to the Employee’s continued employment through the vesting date.

In the event that (i) there is a “Change in Control” (as defined below) that occurs prior to the date on which the Restricted Stock Units become fully vested, then 100% of the Restricted Stock Units that have not already vested as of the date of such termination shall become vested. A “ Change of Control ” means a reorganization, merger, statutory share exchange, or consolidation or similar transaction involving the Company, or a sale or other disposition of all or substantially all of the assets of the Company, unless , following such transaction, all or substantially all of the individuals and entities who were the beneficial owners of the Company’s equity and voting securities immediately prior to such transaction beneficially own, directly or indirectly, more than fifty percent (50%) of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securities.

d.        Clawback . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Employee 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.        Fringe Benefits . The Company shall provide the following benefits to the Employee during the Term, subject to the Employee remaining eligible for such benefits based on the Employee’s number of hours worked per week:

a.        Employee Benefit Plans . The Employee will be eligible to participate in any employee benefit plans including, without limitation, group insurance, profit sharing and 401(k) plans, sponsored generally by the Company for its employees as may be offered from time to time. Notwithstanding the foregoing, the Company may modify or terminate any employee benefit plan at any time.

b.        Vacation . Commencing on the Effective Date and continuing through April 30, 2019, the Employee shall accrue in accordance with the Company’s vacation policy as in effect from time to time twenty (20) days per year of paid vacation time, provided that, any earned but unused vacation in a year may not be carried forward to future years. Commencing on May 1, 2019 and continuing through the Term Date, the Employee shall accrue in accordance with the Company’s vacation policy as in effect from time to time ten (10) days per year of paid vacation time, provided that, any earned but unused vacation in a year may not be carried forward to future years.

c.        Personal Days, Sick Leave and Holidays . Commencing on the Effective Date and continuing through April 30, 2019, the Employee shall be entitled to receive paid personal days, sick days and holidays under the guidelines established by the Company from time to time for the Company’s executive and management employees, provided that, any earned but unused personal and sick days in a year may not be carried forward to future years. Commencing on May 1, 2019 and continuing through the Term Date, the Employee shall be entitled to receive paid personal days, sick days and holidays under the guidelines established by the Company from time to time for the Company’s executive and management employees, provided that, such paid personal days, sick days and holidays shall be prorated based on the Employee’s part-time employment, and further provided that, any earned but unused personal and sick days in a year may not be carried forward to future years.

d.        Business Expense Reimbursement . Subject to the Company’s policies and procedures for the reimbursement of business expenses incurred by its executive and management employees, the Company shall reimburse the Employee for reasonable expenses incurred by the Employee in connection with the performance of the Employee’s duties pursuant to this Agreement, including, but not limited to, travel expenses, professional conventions or similar professional functions and other reasonable business expenses. The Employee 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 Employee for expenses claimed if the Employee does not provide sufficient receipts and/or documentation. The Employee shall submit requests for reimbursement of business expenses at least once every month. The Employee shall be entitled to a corporate credit card, and any frequent flyer miles earned for travel contemplated under this Agreement shall be owned by the Employee.

8.        Termination . Notwithstanding any other provision of this Agreement to the contrary, during the Term, the employment of the Employee by the Company shall terminate as follows:

a.        Death/Disability . The employment of the Employee by the Company shall terminate immediately upon death of the Employee or immediately upon the determination of Disability in accordance with this Section 8(a). As used in this Agreement, “ Disability ” shall mean the Employee is unable to perform the Employee’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 Employee and the Company, provided that if the Employee and the Company do not agree on a physician, the Employee 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 offices or duties of the Employee during a period of the Employee’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 employment of the Employee by the Company shall terminate at the election of the Company, on reasonable grounds, immediately upon the giving of written notice by the Company to the Employee of the Employee’s termination with Cause. For purposes of this Agreement, the term “ Cause ” means that the Employee: (i) has been convicted of, or entered a plea of guilty or “ nolo contendere ” to, a felony or a crime causing material harm to the standing and reputation of the Company, (ii) violated any of the Employee’s obligations under this Agreement, any award agreement under the EIP, any proprietary rights, non-competition, non-disclosure or other restrictive covenant agreements in effect between the Employee and the Company, which are demonstrably willful or deliberate on the Employee’s part, (iii) has willfully or deliberately failed to perform the Employee’s material duties assigned by the Company (other than by reason of illness or temporary disability), (iv) has engaged in illegal conduct, gross misconduct, fraud or material dishonesty in connection with the Business of the Company, (v) has engaged in willful misappropriation or embezzlement of any of the Company’s funds or property, or (vi) has engaged in conduct that violated the Company’s then existing written internal policies or procedures and which is materially detrimental to the Business or reputation of the Company. Any of the aforesaid clauses (ii), (iii) and (vi) may be cured by the Employee, if curable, if cured within fifteen (15) days after receipt by the Employee 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 Employee’s failure to cure, must be at least fifteen (15) days after such notice of termination to afford the Employee the ability to cure the same. The Company may place the Employee on paid leave for up to ninety (90) consecutive days while it is determining whether there is a basis to terminate Employee’s employment for Cause. This leave will not constitute Good Reason.

c.        Without Cause . The employment of the Employee 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 Employee without Cause.

d.        Voluntary Resignation . The employment of the Employee by the Company shall terminate at the election of the Employee 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 Employee’s Voluntary Resignation may be for “ Good Reason ” if, other than to the extent the cause of the event is primarily the result of Employee’s voluntary actions or omissions in providing services hereunder, (i) the Company commits a material breach of its obligations under this Agreement, (ii) there is a material reduction of the Employee’s duties, authority or status other than reductions or limitations imposed by law or regulatory authority or otherwise set forth in this Agreement, or (iii) a material reduction in (or a failure to pay or provide) the Employee’s Base Salary or other benefits to which the Employee is entitled under this Agreement other than reductions otherwise set forth in this Agreement. The Employee 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 Employee’s termination of employment shall not constitute termination with Good Reason unless such termination occurs within sixty (60) days following the last day of the Cure Period.

e.        Notice of Termination . Any termination of the Employee’s employment by the Company or by the Employee (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 Employee’s employment under the provision so indicated.

f.        Date of Termination . The “ Date of Termination ” shall mean the date the Employee’s employment is terminated in accordance with this Section 8.

9.        Effects of Termination .

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

i.       any earned and accrued but unpaid Base Salary through the Date of Termination payable in accordance with the Company’s normal payroll practices;

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

iii.       all other applicable payments or benefits to which the Employee shall be entitled under, and paid or provided in accordance with, the terms of any applicable arrangement, plan or program under Section 7(a)-(c) (collectively, Sections 9(a)(i)-(iii), payable in accordance with this Section 9(a), shall be hereafter referred to as the “ Accrued Benefits ”);

iv.       subject to Section 9(e), any accrued but unpaid Sales Incentive for the calendar quarter immediately prior to the termination, payable when the applicable Sales Incentive for such calendar quarter would have otherwise been paid; and

v.       subject to Section 9(e), any unvested Restricted Stock Units that are subject to vesting under Section 6(c) shall continue to vest in accordance with the vesting schedule set forth in Section 6(c) notwithstanding the Employee’s termination of employment with the Company.

b.        Termination by the Company without Cause or Voluntary Resignation by the Employee for Good Reason . If the employment of the Employee should terminate at the election of the Company without Cause or at the election of the Employee due to a Voluntary Resignation for Good Reason, the Company shall pay or provide to the Employee the Accrued Benefits and reimbursement for any unreimbursed business expenses incurred through the Date of Termination in accordance with Section 7(d), and, subject Sections 9(e) and 10:

i.       any accrued but unpaid Sales Incentive for the calendar quarter immediately prior to the termination, payable when the applicable Sales Incentive for such calendar quarter would have otherwise been paid; and

ii.       any unvested Restricted Stock Units that are subject to vesting under Section 6(c) shall continue to vest in accordance with the vesting schedule set forth in Section 6(c) notwithstanding the Employee’s termination of employment with the Company, provided that , on each vesting date that the Employee has not materially breached the Restrictive Covenants, which breach has not been cured by the Employee, if curable, within ten (10) days following written notice thereof from the Company.

c.        By the Company For Cause; Voluntary Resignation by the Employee without Good Reason . In the event that the Employee’s employment is terminated during the Term by the Company for Cause or a Voluntary Resignation by the Employee without Good Reason, the Company shall pay or provide to the Employee the Accrued Benefits and reimbursement for any unreimbursed business expenses incurred through the Date of Termination in accordance with Section 7(d), and any unvested Restricted Stock Units as of the Termination Date shall be immediately forfeited.

d.        Expiration . In the event that the Employee’s employment terminates by reason of the expiration of the Term hereof, then the Company shall pay to the Employee the Accrued Benefits and reimbursement for any unreimbursed business expenses incurred through the Date of Termination in accordance with Section 7(d), and, subject Section 9(d):

i.       any accrued but unpaid Sales Incentive for the calendar quarter immediately prior to the termination, payable when the applicable Sales Incentive for such calendar quarter would have otherwise been paid; and

ii.       the unvested Restricted Stock Units that are subject to vesting under Section 6(c) as of the Term Date shall vest as of the Term Date.

e.        Release . Any payments or benefits by the Company required under Sections 9(a)(iv)-(v), 9(b)(i)-(ii) and 9(d)(i)-(ii) shall be conditioned on and shall not be payable unless the Company receives from the Employee (or, in the event of the Employee’s death, the estate of the Employee) within thirty (30) 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 Employee (or, in the event of the Employee’s death, the estate of the Employee) 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 ”), provided, however, that the Released Claims shall not include any claim by the Employee for indemnification from the Company relating to any act or omission prior to the Date of Termination, in each instance to the extent the Employee would have the right to be indemnified therefor under (and not otherwise prohibited or restricted by) (i) the laws of the State of Nevada, (ii) any Federal law applicable to the Company or the Employee, (iii) the Company’s articles of incorporation or bylaws, as amended, and (iv) the D&O Indemnity Agreement by and between the Employee and the Company dated May 10, 2017. 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 Employee terminating or being terminated from the Employee’s employment with the Company for any reason, notwithstanding anything else appearing in this Agreement or otherwise, the Employee will stop serving the functions of the Employee’s terminated or expired position(s), including but not limited to any director or officer positions at the Company or any of its affiliates, and shall be without any of the authority or responsibility for such position(s).

10.        Section 409A .

a.       Although the Company does not guarantee the tax treatment of any payments under this Agreement, the intent of the Parties is that the payments and benefits under this Agreement be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and all Treasury Regulations and guidance promulgated thereunder (“ Code Section 409A ”) and to the maximum extent permitted this Agreement shall be limited, construed and interpreted in accordance with such intent. In no event whatsoever shall the Company or its affiliates or their respective officers, directors, employees or agents be liable for any additional tax, interest or penalties that may be imposed on the Employee by Code Section 409A or damages for failing to comply with Code Section 409A.

b.       Notwithstanding any other provision of this Agreement to the contrary, to the extent that any reimbursement of expenses constitutes “deferred compensation” under Code Section 409A, such reimbursement shall be provided no later than December 31 ^st of the year following the year in which the expense was incurred (or, where applicable, no later than such earlier time required by this Agreement). The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year.

c.       For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the right to receive payments in the form of installment payments shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment. Whenever a payment under this Agreement may be paid within a specified period, the actual date of payment within the specified period shall be within the sole discretion of the Company.

d.       Notwithstanding any other provision of this Agreement to the contrary, if at the time of the Employee’s separation from service (as defined in Code Section 409A), the Employee is a “Specified Employee”, then the Company will defer the payment or commencement of any nonqualified deferred compensation subject to Code Section 409A payable upon separation from service (without any reduction in such payments or benefits ultimately paid or provided to the Employee) until the date that is six (6) months following separation from service or, if earlier, the earliest other date as is permitted under Code Section 409A (and any amounts that otherwise would have been paid during this deferral period will be paid in a lump sum on the day after the expiration of the six (6)-month period or such shorter period, if applicable). The Employee will be a “Specified Employee” for purposes of this Agreement if, on the date of the Employee’s separation from service, the Employee is an individual who is, under the method of determination adopted by the Company designated as, or within the category of executives deemed to be, a “Specified Employee” within the meaning and in accordance with Treasury Regulation Section 1.409A-1(i). The Company shall determine in its sole discretion all matters relating to who is designated as a “Specified Employee” and the application of and effects of the change in such determination.

e.       Notwithstanding anything in this Agreement or elsewhere to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute “non-qualified deferred compensation” within the meaning of Code Section 409A upon or following a termination of the Employee’s employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service” and the date of such separation from service shall be the date of termination for purposes of any such payment or benefits.

11.        Activity Restrictions; Employee Covenants .

a.         Purpose . As previously acknowledged, the Company has invested heavily in its information systems, personnel, product development, customers, and customer development. As a member of the Company’s management group, the Employee is entrusted with the fruits of these investments and the decisions to be made regarding similar future investments. In order to participate in the benefits of a highly compensated position of trust with the Company, the Company requires a written commitment from key employees that its trust will not be misplaced and its investments lost or damaged. Accordingly, the Employee makes the following promises regarding the Employee’s activities.

b.         Best Efforts . The Employee will at all times perform all of the Employee’s assigned duties faithfully and exert the Employee’s best efforts to fully perform those duties pursuant to the express and implicit terms of this Agreement to the reasonable satisfaction of the Company. During the Term, the Employee 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 interests and welfare of the Company.

c.         Inventions; Intellectual Property .

i.        Inventions . Every invention and improvement conceived, invented or developed by the Employee 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 Employee which relate to the Business during the Term hereof, or as to which the Employee has acquired information as a result of the Employee’s employment with the Company, and all patents obtained on such inventive ideas, (a) the Employee agrees to disclose and assign, without charge, all such inventive ideas and any patents obtained thereon to the Company, but without expense to the Employee, (b) the Employee agrees that all such inventive ideas and any patents thereof shall be the exclusive property of the Company, and (c) the Employee 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 Employee shall give the Company the full and exclusive power to prosecute all such applications and all proceedings in connection therewith.

ii.        Intellectual Property . The Employee 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 Employee in the course of the Employee’s employment, the Employee’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 Employee during the period of the Employee’s employment by the Company or its affiliates and whether developed by the Employee 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 Employee during non-work hours, consistent with the Employee’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 Employee 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 two (2) years after the termination or expiration of this Agreement, regardless of who initiated the termination, the Employee 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 or any prospective customer with whom the Company had any contact during the Term hereof.

e.         Non-enticement of Personnel . During the Term hereof and for a period of two (2) years after the termination or expiration of this Agreement, regardless of who initiated the termination, the Employee 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 Employee 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 11(e) by seeking whatever equitable and legal remedies may be available to the Company hereunder.

f.         Confidentiality . The Employee 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 Employee during the Term (including, without limitation, any information and knowledge that was conceived, created, or developed by the Employee during the course of the Employee’s employment 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 11(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 11(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 Employee with respect to the disclosure and use of confidential information under this Section 11(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 Employee. In the event the Employee is required by any legal proceedings to disclose confidential information, the Employee shall provide the Company with prompt notice thereof so that the Company may seek an appropriate protective order and/or waive compliance by the Employee with the provisions hereof.

g.         Non-competition . During the Term hereof and for a period of two (2) years after the termination or expiration of this Agreement, regardless of who initiated the termination, the Employee 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 Employee specifically agrees, without limitation, that the Employee 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 in 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 Employee 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 Employee 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 Employee 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 officers, directors and senior management team to not disparage or encourage or induce others to disparage the Employee. 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 Employee 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.         Employee’s Representations . The Employee represents and acknowledges that none of the activity restrictions set forth in this Section 11 will prevent the Employee 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 Employee further acknowledges that the Employee 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 11 can cause harm to the Company of an irreparable nature for which money damages alone will not suffice. The Employee agrees that the Employee will fully and promptly disclose to any person or entity with which the Employee becomes associated subsequent to the termination or expiration of this Agreement all of the restrictions on the Employee’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 Employee subsequent to the termination or expiration of this Agreement.

k.         Common Law and Trade Secrets . The Employee 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 11, the Employee acknowledges and agrees that the post-termination restrictions contained in this Section 11 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 Employee acknowledges and agrees that any breach by the Employee of any of the provisions of Section 11 (the “ Restrictive Covenants ”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Employee 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 Employee 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 Employee 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 Employee as the result of any transactions constituting a breach of the Restrictive Covenants, and the Employee shall account for and pay over such Benefits to the Company and, if applicable, its affected affiliates.

12.        Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company’s successors and assigns and the Employee’s personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. This Agreement shall not be assignable by the Employee, it being understood and agreed that this is a contract for the Employee’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 12 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.

13.        Alternative Dispute Resolution .

a.        Coverage . Except as otherwise expressly provided in this Agreement or by law, this Section 13 is the sole and exclusive method by which the Employee and the Company are required to resolve any and all disputes arising out of or related to the Employee’s employment with the Company or the termination of that employment, each of which is referred to as “ Employment-Related 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 Employee’s employment, (ii) application or enforcement of any Company program or policy to the Employee, (iii) any disciplinary action or other adverse employment decision of the Company or any statement related to the Employee’s employment, performance or termination, (iv) any policy of the Company or any agreement between the Employee and the Company, (v) disputes over the arbitrability of any controversy or claim which arguably is or may be subject to this Section 13, (vi) claims arising out of or related to any current or future federal, state or local civil rights laws, fair employment laws, wage and hour laws, fair labor or employment standards laws, laws against discrimination, equal pay laws, wage and salary payment laws, plant or facility closing or layoff laws, laws in regard to employment benefits or protections, family and medical leave laws, and whistleblower laws, including by way of example, but not limited to, the federal Civil Rights Acts of 1866, 1871, 1964 and 1991, the Pregnancy Discrimination Act of 1978, the Age Discrimination in Employment Act of 1967, the Equal Pay Act of 1963, the Fair Labor Standards Act of 1938, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, and the Employee Retirement Income Security Act of 1978, as they have been or may be amended from time to time, or (vii) any other dispute arising out of or related to the Employee’s employment or the Employee’s termination.

b.        Negotiation; Mediation . Any Employment-Related 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 Employment-Related Disputes so asserted. If the Employment-Related Disputes so asserted cannot be settled through negotiation and remains unresolved after the fifteen (15)-day negotiation period, the Employee 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 Judicial Arbiter Group, Inc. (“ JAG ”) panel pursuant to the AAA rules. 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 Employment-Related Disputes so asserted cannot be settled through mediation and remains unresolved thirty (30) days after the appointment of a mediator, the Employee 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 JAG in its office in Denver, Colorado. The arbitration and resolution of the dispute shall be resolved by a single arbitrator appointed by the JAG 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 JAG 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 14(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

14.        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 (together with the Exhibits hereto and any agreements, policies or other documents specifically referenced herein) constitutes the entire understanding or agreement between the Company and the Employee relating to the subject matter hereof and there is no understanding or agreement, oral or written, which is not set forth herein. This Agreement supersedes and replaces any prior employment agreement or understanding, oral or written, between the Company and the Employee including, without limitation, the Original Agreement. This Agreement may only be amended by a writing signed by the Company and the Employee.

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 . In the event of a conflict or ambiguity created between the Company’s current personnel manual for all employees and this Agreement, it is agreed that this Agreement shall control. No policies, procedures, or statements of any nature by the Company shall modify this Agreement or be construed to create express or implied obligations to the Employee. 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 14(e).

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 Employee 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 Employee acknowledges and agrees that, notwithstanding anything herein to the contrary, including without limitation Section 13(d) hereof, upon any breach by the Employee of the Employee’s obligations under Section 11, 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 Employee hereby agrees that for a period of eighteen (18) months following the termination or expiration of this Agreement, the Employee shall cooperate fully with the Company’s reasonable requests relating to matters that pertain to the Employee’s employment 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 herself reasonably available to the Company for other related purposes. Any such cooperation shall be performed at scheduled times taking into consideration the Employee’s other commitments. The Employee 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 Employee would conflict with the Employee’s rights under or ability to enforce this Agreement. The Employee will be compensated by the Company, as an independent contractor, at a rate of $85 per hour for services actually rendered by the Employee at the request of the Company under this Section 14(i).

j.        Withholding . Any payments provided for in this Agreement shall be paid net of any applicable income tax withholding required under federal, state or local law.

k.        Survival . Notwithstanding anything in this Agreement or elsewhere to the contrary, the provisions of Sections 9, 10, 11, 12, 13 and 14 shall survive the termination of the Employee’s employment or the termination or expiration of 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.

m.        Section 10b-5 Plan . During the Term, the Company will cooperate with the Employee in the implementation of a Section 10b-5 plan commencing on or about January 1, 2019 to allow the Employee and her spouse (collectively, the “Keens”) to sell shares of the Company’s common stock owned by the Keens in open market transactions. The Section 10b-5 plan will be implemented to allow the Keens to sell shares of the Company’s common stock in monthly intervals and in an amount not to exceed 200,000 shares per month. The intent underlying the Section 10b-5 plan is to reduce the Keens’ common stock ownership below the 10% threshold for reporting under Section 16(a) of the Securities Exchange Act of 1934, as amended. As part of this arrangement, as long as the Employee is employed by the Company and for the six months thereafter, the Employee will not acquire any shares of the Company’s common stock in market, private or other transactions.

[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.

[Signature Page to Employee Employment Agreement]

EXHIBIT A

Permitted Activities

None

EXHIBIT B

Restricted Stock Unit Agreement

STOCK REPURCHASE AGREEMENT

THIS STOCK REPURCHASE AGREEMENT (this “Agreement”) is made and entered into as of May 29, 2018 by and between Stephen B. Keen and Brandy M. Keen (together the “Selling Stockholders”) and Surna Inc., a Nevada corporation (the “Company”). The Selling Stockholders and the Company may be referred to herein individually as a “Party” or collectively as the “Parties.”

WHEREAS, the Selling Stockholders own in the aggregate 20,284,669 shares (the “Shares”) of common stock of the Company, $0.00001 par value (the “Common Stock”); and

WHEREAS, the Shares are evidenced by certificate number 342-6 issued September 12, 2004 for 16,704,835 shares, by certificate number 892-0 issued May 10, 2017 for 664,834 shares, and 2,935,000 shares held in street name for the benefit of the Selling Stockholders (certificate numbers 342-6 and 892-0 being referred to herein as the “Certificates”); and

WHEREAS, the Selling Stockholders are willing to sell to the Company the Repurchased Shares (as defined below), contingent on the closing of a private placement offering to accredited investors of the Common Stock (which may, in the sole discretion of the Company’s Board of Directors (the “Board”), be a unit offering consisting of one share of Common Stock and a warrant to purchase one share of Common Stock) resulting in minimum gross proceeds to the Company of $1,500,000 in one or more related sales or, in the sole discretion of the Board, the Company may set aside 33.3% of the proceeds from each closing of the offering (not to exceed $400,000 in the aggregate) to repurchase the shares of Common Stock hereunder (“Qualified Financing”); and

WHEREAS, the Selling Stockholders acknowledge that there is no assurance that the closing of the Qualified Financing will be consummated; and

WHEREAS, this Agreement and the transactions contemplated hereunder are subject to the approval of the Company’s Board of Directors (the “Board”); and

WHEREAS, the sale of the Repurchased Shares by the Selling Stockholders is intended to be a transaction exempt from Section 16(b) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) due to the Board’s approval of this Agreement and the transactions contemplated hereunder; and

WHEREAS, on the terms and subject to the conditions set forth in this Agreement, including the willingness of the Selling Stockholders to wait until the Company has consummated the closing of a Qualified Financing, the Selling Stockholders desire to sell to the Company and the Company desires to purchase from the Selling Stockholders, the Repurchased Shares.

NOW, THEREFORE, IN CONSIDERATION of the recitals set forth above and the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Selling Stockholders agree as follows:

1.        Repurchase and Sale of Common Stock .

(a)       Upon the terms and subject to the conditions of this Agreement, (i) the Company agrees to repurchase such portion of the Shares, which amount of Shares will be based on the Repurchase Price per Share (as defined below) and would result in an aggregate maximum repurchase price of $400,000 (“Repurchased Shares”), and (ii) the Selling Stockholders agree to sell the Repurchased Shares. The repurchase price per each Repurchased Share to be paid by the Company under this Agreement shall be: (i) if the Qualified Financing is a unit offering, a price equal to 80% of the unit price paid by investors to reflect the estimated value of the warrant, or (ii) if the Qualified Offering includes only the sale of shares of Common Stock, a price equal to 100% of the share price paid by investors (the “Repurchase Price per Share”). The aggregate repurchase price for the Repurchased Shares (the “Repurchase Price”) shall be payable in cash by wire transfer or delivery of other immediately available funds at the Closing (as defined below).

(b)       The repurchase and sale of the Repurchased Shares (the “Closing”) shall take place at the offices of the Company, or such other location mutually agreeable to the parties hereto, at 10:00 a.m. MT on the date when all the conditions to the Closing have been satisfied or (subject to applicable law) waiver of the conditions set forth in Section 4 and Section 5 (excluding conditions that, by their terms, cannot be satisfied until the Closing).

(c)       At the Closing:

(i)       the Selling Stockholders shall deliver the Certificates representing the Repurchased Shares to the Company, together with duly executed instruments of transfer or assignment (such as a stock power) in blank with signatures medallion guaranteed; and

(ii)       the Company shall deliver or cause to be delivered the Repurchase Price by wire transfer in immediately available funds to the account as specified in writing by the Selling Stockholder.

2.        Representations and Warranties of the Selling Stockholders . The Selling Stockholders jointly and severally represent and warrant to the Company as of the date hereof and as of the Closing as follows:

(a)        Authorization; Enforcement . The Selling Stockholders, individually and together, have the full right, power and authority to enter into this Agreement and to sell, transfer and deliver the Repurchased Shares to be sold by the Selling Stockholders hereunder. This Agreement when executed and delivered by the Selling Stockholders, will constitute a valid and legally binding obligation of the Selling Stockholders, enforceable against the Selling Stockholders in accordance with its terms, except (A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally; and (B) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The execution and delivery of this Agreement and the sale and delivery of the Repurchased Shares to be sold by the Selling Stockholders and the consummation of the transactions contemplated herein do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, default under, or result in the creation or imposition of any tax, lien, charge or encumbrance upon the Repurchased Shares or any property or assets of the Selling Stockholders pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, license, lease or other agreement or instrument to which the Selling Stockholders are a party or by which the Selling Stockholders may be bound, or to which any of the property or assets of the Selling Stockholders is subject, nor will such action result in any violation of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Selling Stockholders or any of their properties.

(b)        Filing, Consents and Approvals . The Selling Stockholders are not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other person or entity in connection with the execution, delivery and performance by them of this Agreement, including the sale and repurchase of the Repurchased Shares, other than (A) filings with the Securities and Exchange Commission, and (B) those made or obtained prior to the date hereof.

(c)        Valid Title . The Selling Stockholders have and will at the Closing have valid title to the Repurchased Shares to be sold by the Selling Stockholders hereunder, free and clear of any security interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind.

(d)        Absence of Manipulation . The Selling Stockholders have not taken, and will not take, prior to the Closing, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization, shorting, hedging or manipulation of the Common Stock or the price of any security of the Company.

(e)        Certificates Suitable for Transfer . The Certificates for all of the Repurchased Shares to be sold by the Selling Stockholders pursuant to this Agreement are in suitable form for transfer by delivery and will be accompanied by duly executed instruments of transfer or assignment in blank with signatures medallion guaranteed.

(f)        Access to Data . The Selling Stockholders have not been furnished with nor relied upon any representations or other information (whether oral or written) relating to the business or financial condition of the Company or its representatives or agents other as described set forth in the Company’s publicly available documents. To the extent that they are aware of any other information, public or private about the Company and its financial condition and prospects, they have also taken that information into consideration in their decision to enter this Agreement. The Selling Stockholders realize that by selling the Repurchased Shares, they may be foregoing the opportunity to benefit from any increase in the value of the Repurchased Shares.

(g)        Adequate Representation . The Selling Shareholders have either had this Agreement reviewed by their professional advisors, including without limitation their accountant, tax and legal advisers, or decided to forego obtaining their advice. The Selling Shareholders are not relying on any accounting, tax, or legal advice which may be or may have been suggested by any Company official or consultant or adviser.

(h)        Qualified Financing Contingency . The Selling Shareholders acknowledge and agree that the sale and repurchase by the Company of the Repurchased Shares under this Agreement is subject to the Company’s closing of a Qualified Financing, and without such financing, the Company will not have any obligation to repurchase the Repurchased Shares. The Selling Shareholders understand that the Company is giving no assurance that it will be able to complete a Qualified Financing, that it has no commitments from any investors to invest in a Qualified Financing, has not hired and may not hire any selling agent to facilitate the sale of securities in a Qualified Financing, and that the officers, directors and current investors in the Company have made no commitment to invest in the Company to raise any portion of the Qualified Financing. The Selling Shareholders understand and agree that the Company has full discretion in the structuring of the sale of the securities and defining the terms of the offering of the securities, and the Company has full discretion to not make any offering or to withdraw any offering at any time once commenced.

3.        Representations and Warranties of the Company . The Company represents and warrants to the Selling Stockholders as of the date hereof and as of the Closing as follows:

(a)        Authorization; Enforcement . The Company has the full right, power and authority to enter into and deliver this Agreement, and this Agreement when executed and delivered by the Company, assuming this Agreement is a valid and legally binding obligation of the Selling Stockholder, constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms except (A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors; rights generally; and (B) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The Company has the full legal right and power and all authority and approval required to execute and deliver, or authorize execution and delivery of, this Agreement, and all other instruments executed and delivered by or on behalf of the Company in connection with the repurchase of the Repurchased Shares by the Company from the Selling Stockholders hereunder.

(b)        Compliance with Other Instruments . The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby and thereby will not result in any violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any provision of the governing documents of the Company or any instrument, judgment, order, writ, decree or contract to which the Company or any of its subsidiaries is a party or by which it is bound, or any provision of any federal or state statute, rule or regulation applicable to the Company or any of its subsidiaries.

4.        Conditions of the Company’s Obligations at Closing . The obligations of the Company to the Selling Stockholders under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived by the Company:

(a)        Closing of Qualified Financing . As a condition to the Company’s obligation to purchase the Repurchased Shares hereunder, the Company shall complete a Qualified Financing, the offering to be in the full discretion of the Company, including the offering terms, timing, right to not commence an offering and to terminate at any time any offering commenced.

(b)        Delivery of Certificates . The Selling Stockholders shall have presented and delivered the Certificates representing the Repurchased Shares and the accompanying instruments of transfer to the Company.

5.        Conditions of the Selling Stockholders’ Obligations at Closing . The obligations of the Selling Stockholders to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following any conditions, unless otherwise waived by the Selling Stockholder:

(a)        Delivery of the Purchase Price . The Company shall have sufficient funds to pay the Repurchase Price and be in a position to pay the Repurchase Price as of the Closing in good funds.

6.        Covenants .

(a)        Publicity . The Selling Shareholders will consult with the Company in issuing any press releases or otherwise making public statements with respect to the transactions contemplated by this Agreement and any related materials, and the Selling Shareholders will not issue any press release or otherwise make any public statement, other than as required by law, without the prior written consent of the Company, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing Selling Shareholder will provide the Company with prior notice of the proposed public statement. The Selling Shareholders acknowledge that this Agreement and related materials may be deemed to be a “material contract,” as that term is defined by Item 601(b)(10) of Regulation S-K and the Company may therefore be required to file this Agreement as an exhibit to reports or registration statements filed with the Securities and Exchange Commission. The Selling Stockholders further agree that the status of this Agreement and any related materials as material contracts shall be determined solely by the Company, in consultation with its counsel.

(b)        Trading Activities . Until the consummation of the repurchase of the Repurchased Shares and the Closing, each of the Selling Shareholders and their affiliates agrees not to maintain any open short position or engage in any other form of hedging or similar transactions in the Common Stock of the Company, and the Selling Shareholders each agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging or similar transactions with respect to the Common Stock of the Company.

7.        Miscellaneous .

(a)        Survival of Representations and Warranties . The representations and warranties of the Selling Stockholders and the Company contained herein shall terminate on the second anniversary of the Closing and thereafter shall expire and have no further force and effect. Notwithstanding the foregoing, the representation of the Selling Stockholders in Section 2(c) hereof, which relates to valid title, shall survive until the sixth year anniversary of the Closing.

(b)        Transfer, No Third-Party Beneficiaries . This Agreement shall not be assigned without the prior written consent of the Company; provided, that the Company may transfer its rights hereunder to a third party, so long as such third party agrees in writing to be bound by all obligations under this Agreement and confirms in writing the representations and warranties set forth in Section 3 as if made by such third party. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement.

(c)        Counterparts . This Agreement may be executed in two or more counterparts, including by facsimile, PDF, DocuSign, or other generally recognized form of electronic transmission each of which shall be deemed an original and all of which together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each of the parties and delivered to the other party; it being understood that all parties need not sign the same counterpart.

(d)        Titles and Subtitles . 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.

(e)       Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by fax or email, both with evidence of a completed transmission and receipt, or four (4) business days after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page hereto, or as subsequently modified by written notice, and if to the Selling Stockholders at 6914 Peace Street, Frederick, CO 80530, and if to the Company, 1780 55th Street, Boulder, Colorado 80301, Attn.: President & CEO.

(f)        Finder’s Fee . Each party represent that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction.

(g)        Fees and Expenses . Each of the Selling Stockholders and the Company shall pay their respective fees and all other associated expenses incurred by such party in connection with the negotiation, execution, delivery and performance of the Agreement. The Company shall pay all transfer agent fees and stamp taxes. Any other costs of the transfer of the Repurchased Shares to the Company and any taxes, costs, imposts or duties levied or due at any time in connection with the sale of the Repurchased Shares to the Company shall be the sole, joint and several responsibility of the Selling Shareholders.

(h)        Amendments, Modifications and Waivers . No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by the Selling Stockholders and the Company.

(i)        Entire Agreement . This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof and thereof.

(j)        Consent to Jurisdiction; Venue . Regardless of any conflict of law or choice of law principles that might otherwise apply, the parties agree that this Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Colorado. The parties all expressly agree and acknowledge that the State of Colorado has a reasonable relationship to the parties and/or this Agreement. As to any dispute, claim or litigation arising out of or relating in any way to this Agreement or the transaction contemplated hereby, the parties hereto hereby agree and consent to be subject to the exclusive jurisdiction of any state court, or federal court of the United States of America, sitting in Denver, Colorado, and any appellate court from any thereof. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, (a) any objection that it may now or hereafter have to laying venue of any suit, action or proceeding brought in such court, (b) any claim that any suit, action or proceeding brought in such court has been brought in an inconvenient forum, and (c) any defense that it may now or hereafter have based on lack of personal jurisdiction in such forum.

(k)        WAIVER OF JURY TRIAL . EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

(l)        Successors . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns

(m)        Cooperation . Each of the Selling Stockholders and the Company agrees to reasonably cooperate with the other parties and, at their own cost, time being of the essence, to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by such party to evidence or reflect the transactions contemplated by this Agreement and to carry out the intent and purpose of this Agreement.

(n)        Severability . If any term or other provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect so long as the economic or legal substance of this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible.

(o)        Specific Performance; Injunctive Relief . The parties hereto acknowledge that the parties shall be irreparably harmed and that there shall be no adequate remedy at law for a violation of any of the covenants or agreements of the other parties set forth in this Agreement. Therefore, each party hereby agrees that, in addition to any other remedies that may be available to the Selling Stockholders or the Company, as applicable upon any such violation, such party shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means to which they are entitled at law or in equity.

(p)        Representation . This Agreement was negotiated by the parties with the benefit of legal representation, or such representation was affirmatively considered and not sought, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation thereof.

(Signature Page Follow)

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

PREFERRED STOCK OPTION AGREEMENT

THIS PREFERRED STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of May 29, 2018 by and between Stephen B. Keen and Brandy M. Keen (together the “Selling Stockholders”) and Surna Inc., a Nevada corporation (the “Company”). The Selling Stockholders and the Company may be referred to herein individually as a “Party” or collectively as the “Parties.”

WHEREAS, the Selling Stockholders own in the aggregate of 35,189,669 shares (the “Shares”) of preferred stock of the Company, $0.00001 par value (the “Preferred Stock”), as evidenced by certain stock certificates (the “Certificates”);

WHEREAS, the Selling Stockholders are willing to sell to the Company the Shares, pursuant to this option Agreement on the basis of an exchange of common stock of the Company, $0.00001 par value (“Common Stock”) for the outstanding Shares; and

WHEREAS, this Agreement and the transactions contemplated hereunder are subject to the approval of the Company’s Board of Directors (the “Board”); and

WHEREAS, this Agreement and the issuance of the Common Stock to the Selling Stockholders upon exercise of this option by the Company and the exchange of the Shares are intended to be transactions exempt from Section 16(b) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) due to the Board’s approval of this Agreement and the transactions contemplated hereunder; and

WHEREAS, on the terms and subject to the conditions set forth in this Agreement, the Selling Stockholders desire to grant to the Company this option and upon exercise of the option to sell to the Company by way of an exchange of Common Stock for the Shares, and the Company desires to obtain this option and have the right to acquire the Shares from the Selling Stockholders.

NOW, THEREFORE, IN CONSIDERATION of the recitals set forth above and the mutual covenants contained in this Agreement, and for other good and valuable consideration in the amount of $5,000, the receipt and adequacy of which are hereby acknowledged, the Company and the Selling Stockholders agree as follows:

1.        Grant of Option . The Selling Shareholders jointly and severally hereby grant to the Company the option to acquire any or all of the Shares at any time and from time to time, during the exercise period of this option Agreement.

2.        Exercise Period . The option granted to the Company to acquire the Shares may be exercised at any time and from time to time, for any or all of the Shares, from the date hereof through the close of business at 5:00 pm, Colorado Time, on April 30, 2020. After the foregoing date, this option may not be exercised, absent a written amendment or modification of this Agreement agreed by the Selling Shareholders and the Company.

3.        Exercise Price of the Option . The Company has the right to acquire the Shares in round lots of 1,000 Shares for an exercise price per round lot of one (1) share of Common Stock. The option must be exercised for round lots of 1,000 of the Shares, and after exercise of all the round lots of the Shares available to be acquired, if there remains an amount of Shares held by the Selling Shareholders that is less than 1,000, then the Company may acquire the remaining number of Shares for one (1) share of Common Stock. The Company shall only issue a full share of Common Stock, and if a fractional share of Common Stock is due to be issued, the Company will round up to the next whole share of Common Stock.

4.        Exercise of the Option .

(a) The option may be exercised by delivering to the Selling Shareholders a notice of exercise in the form attached hereto as Exhibit A , duly completed and executed by the Company. Within five (5) business days of the date of the exercise notice, the Selling Shareholders, time being of the essence, will deliver the number of Shares being acquired under the exercise notice, against the issuance by the Company of the number of shares of Common Stock due and owing for the acquired Shares. The issuance of the Common Stock may be by delivery of the Common Stock by certificate, DRS notice from the transfer agent for the Company or other forms of electronic delivery of the Common Stock, at the discretion of the Company. The Selling Stockholders understand that the shares of Common Stock issued upon the exercise of the option shall be “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Selling Stockholders must hold the shares of Common Stock indefinitely unless they are registered with the Securities and Exchange Commission (“SEC”) and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Selling Stockholders acknowledge that the Company has no obligation to register or qualify the shares of Common Stock for resale. The Company and Selling Stockholders, subject to the advice of counsel and taking into consideration all relevant facts, will seek to apply the tacking provisions of Rule 144 promulgated by the SEC so that the holding period of the Common Stock issued on exercise of the option will include the holding period of the Shares.

(b)       Upon exercise of the option and delivery of the Common Stock in exchange for the Shares, the Selling Shareholders will be responsible for all federal, state and local income or other taxes. If the transaction requires the withholding of any tax payment, then prior to the delivery of the Common Stock, the Selling Shareholders will pay to the Company the amount due to be paid in respect of any tax payment, or arrange for the Company to withhold from any other payment due to the Selling Shareholders, severally or jointly, the amount due for the sale of the Shares to the Company or the receipt of the Common Stock on exercise of the option under this Agreement, so as to sufficiently satisfy any applicable tax obligation incident to the exercise of this option.

5.        No Transfer or Assignment . The Selling Shareholders agree not to transfer, encumber, pledge or hypothecate or otherwise grant any option or other right to any person or entity in the Shares during the exercise period of the option and any agreed upon extension. Additionally, the Selling Shareholders shall not assign this Agreement to any other person or entity, without the express written consent of the Company, which may be conditioned on any requirement of the Company as determined in its discretion, which consent may be withheld in the Company’s discretion for any reason. The Company is hereby granted the authority to not transfer or otherwise to stop the transfer of the Shares during the term of this Agreement to any person or entity other than the Company if the Selling Shareholders attempt to affect a transfer, encumbrance, pledge or hypothecation of the Shares to any person or entity other than the Company. Any attempt to affect a transfer, encumbrance, pledge or hypothecation of the Shares by the Selling Shareholders in violation of this Agreement shall be null and void ab initio , shall not be recorded on the books of the Company or its transfer agent and shall not be recognized by the Company. Each party hereto acknowledges and agrees that any breach of this provision of the Agreement would result in substantial harm to the other parties hereto for which monetary damages alone could not adequately compensate. Therefore, the parties hereto unconditionally and irrevocably agree that the Company shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance or the rescission of purchases, sales and other transfers of Shares not made in strict compliance with this Agreement), in addition to any other rights that the Company may exercise at law or under this Agreement.

6.        Compliance with Laws and Regulations .

(a)        The Company will not be obligated to issue or deliver shares of Common Stock pursuant to this Agreement unless the issuance and delivery of the shares of Common Stock in exchange for the Shares complies with applicable law, including, without limitation, the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, and the requirements of any stock exchange or market upon which the Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)       In connection with the exercise of this option, Selling Shareholders will execute and deliver to the Company such representations in writing as may be requested by the Company so that it may comply with the applicable requirements of the United States federal and state securities laws.

(c)       If in compliance with the United States federal and state securities laws a restrictive legend is required to be placed against the Common Stock issued in exchange for the Shares, then the Selling Shareholders hereby consent to the imposition of any restrictions necessary for the Company to comply with the applicable securities laws, including the placement of an appropriate restrictive legend and stop transfer orders against the shares of Common Stock to be delivered to them.

7.        Notices . Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by fax or email, both with evidence of a completed transmission and receipt, or four (4) business days after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the Company at its principal executive offices, Attention: Chief Executive Officer, or to Selling Shareholders at the residence/office address reflected in the records maintained by the Company on a current basis.

8.        Adjustment to the Number of Shares . If the Company implements any reverse stock split of its Common Stock or the Preferred Stock or issues any shares of Common Stock or Preferred Stock to all the holders of the class of stock by means of a dividend or forward split, then the number of shares of Common Stock to be issued or the number of Shares to be acquired shall be appropriately and equitably adjusted to reflect the change in the capitalization of the Company. If any shares of Common Stock or other securities are issued by way of dividend or forward split in respect of the Preferred Stock, then this option Agreement shall equally apply to those securities, so that the Company has the right to acquire the other securities.

9.        Representations and Warranties of the Selling Stockholders . The Selling Stockholders jointly and severally represent and warrant to the Company as of the date hereof and as of the Closing as follows:

(a)        Authorization; Enforcement . The Selling Stockholders, individually and together, have the full right, power and authority to enter into this Agreement and to sell, transfer and deliver the Shares to be sold by the Selling Stockholders hereunder. This Agreement when executed and delivered by the Selling Stockholders, will constitute a valid and legally binding obligation of the Selling Stockholders, enforceable against the Selling Stockholders in accordance with its terms, except (A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally; and (B) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The execution and delivery of this Agreement and the sale and delivery of the Shares to be sold by the Selling Stockholders and the consummation of the transactions contemplated herein do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, default under, or result in the creation or imposition of any tax, lien, charge or encumbrance upon the Shares or any property or assets of the Selling Stockholders pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, license, lease or other agreement or instrument to which the Selling Stockholders are a party or by which the Selling Stockholders may be bound, or to which any of the property or assets of the Selling Stockholders is subject, nor will such action result in any violation of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Selling Stockholders or any of their properties.

(b)        Filing, Consents and Approvals . The Selling Stockholders are not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other person or entity in connection with the execution, delivery and performance by them of this Agreement, including the sale and purchase of the Shares, other than (A) filings with the Securities and Exchange Commission, and (B) those made or obtained prior to the date hereof.

(c)        Valid Title . The Selling Stockholders have and will at the exercise of the option under this Agreement have valid title to the Shares to be sold by the Selling Stockholders hereunder, free and clear of any security interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind.

(d)        Absence of Manipulation . The Selling Stockholders have not taken, and will not take, prior to the exercise of the option under this Agreement, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization, shorting, hedging or manipulation of the Common Stock or the price of any security of the Company.

(e)        Certificates Suitable for Transfer . The Certificates for all of the Shares to be sold by the Selling Stockholders pursuant to this Agreement are in suitable form for transfer by delivery and will be accompanied by duly executed instruments of transfer or assignment in blank with signatures medallion guaranteed.

(d)        Access to Data . The Selling Stockholders have not been furnished with nor relied upon any representations or other information (whether oral or written) relating to the business or financial condition of the Company or its representatives or agents other as described set forth in the Company’s publicly available documents. To the extent that they are aware of any other information, public or private about the Company and its financial condition and prospects, they have also taken that information into consideration in their decision to enter this Agreement. The Selling Stockholders realize that by selling the Shares, they may be foregoing the opportunity to benefit from any increase in the value of the Shares.

(e)        Adequate Representation . The Selling Shareholders have either had this Agreement reviewed by their professional advisors, including without limitation their accountant, tax and legal advisers, or decided to forego obtaining their advice. The Selling Shareholders are not relying on any accounting, tax, or legal advice which may be or may have been suggested by any Company official or consultant or adviser.

10.        Representations and Warranties of the Company . The Company represents and warrants to the Selling Stockholders as of the date hereof and as of the Closing as follows:

(a)        Authorization; Enforcement . The Company has the full right, power and authority to enter into and deliver this Agreement, and this Agreement when executed and delivered by the Company, assuming this Agreement is a valid and legally binding obligation of the Selling Stockholders, constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms except (A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors; rights generally; and (B) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The Company has the full legal right and power and all authority and approval required to execute and deliver, or authorize execution and delivery of, this Agreement, and all other instruments executed and delivered by or on behalf of the Company in connection with the purchase of the Shares by the Company from the Selling Stockholders hereunder.

(b)        Compliance with Other Instruments . The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby and thereby will not result in any violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any provision of the governing documents of the Company or any instrument, judgment, order, writ, decree or contract to which the Company or any of its subsidiaries is a party or by which it is bound, or any provision of any federal or state statute, rule or regulation applicable to the Company or any of its subsidiaries.

(c)         Issuance of Shares of Common Stock . The shares of Common Stock to be issued in exercise of the option under this Agreement have been duly authorized and, when issued and paid for in accordance with this Agreement by receipt of the Shares, will be duly and validly issued, fully paid and non-assessable, free and clear of all liens and other encumbrances (subject to the restrictions of the Federal and state securities laws), with the holders being entitled to all rights accorded to a holder of Common Stock.

11.        Covenants .

(a)        Publicity . The Selling Shareholders will consult with the Company in issuing any press releases or otherwise making public statements with respect to the transactions contemplated by this Agreement and any related materials, and the Selling Shareholders will not issue any press release or otherwise make any public statement, other than as required by law, without the prior written consent of the Company, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing Selling Shareholder will provide the Company with prior notice of the proposed public statement. The Selling Shareholders acknowledge that this Agreement and related materials may be deemed to be a “material contract,” as that term is defined by Item 601(b)(10) of Regulation S-K and the Company may therefore be required to file this Agreement as an exhibit to reports or registration statements filed with the Securities and Exchange Commission. The Selling Stockholders further agree that the status of this Agreement and any related materials as material contracts shall be determined solely by the Company, in consultation with its counsel.

(b)        Trading Activities . Until the exercise of the option under this Agreement and consummation of the purchase of the Shares, each of the Selling Shareholders and their affiliates agrees not to maintain any open short position or engage in any other form of hedging or similar transactions in the Common Stock of the Company, and the Selling Shareholders each agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging or similar transactions with respect to the common stock of the Company.

12.        Miscellaneous .

(a)        Survival of Representations and Warranties . The representations and warranties of the Selling Stockholders and the Company contained herein shall terminate on the second anniversary of the exercise of the option under this Agreement and thereafter shall expire and have no further force and effect. Notwithstanding the foregoing, the representation of the Selling Stockholders in Section 9(c) hereof, which relates to valid title, shall survive for a period of six years after the exercise of the option under this Agreement.

(b)        Counterparts . This Agreement may be executed in two or more counterparts, including by facsimile, PDF, DocuSign, or other generally recognized form of electronic transmission each of which shall be deemed an original and all of which together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each of the parties and delivered to the other party; it being understood that all parties need not sign the same counterpart.

(c)        Titles and Subtitles . 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.

(d)        Finder’s Fee . Each party represent that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction.

(e)        Fees and Expenses . Each of the Selling Stockholders and the Company shall pay their respective fees and all other associated expenses incurred by such party in connection with the negotiation, execution, delivery and performance of the Agreement. The Company shall pay all transfer agent fees and stamp taxes. Any other costs of the transfer of the Shares to the Company and any taxes, costs, imposts or duties levied or due at any time in connection with the delivery of the Shares to the Company in exchange for Common Stock shall be the sole, joint and several responsibility of the Selling Shareholders.

(f)        Amendments, Modifications and Waivers . No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by the Selling Stockholders and the Company.

(g)        Entire Agreement . This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof and thereof.

(h)        Consent to Jurisdiction; Venue . Regardless of any conflict of law or choice of law principles that might otherwise apply, the parties agree that this Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Colorado. The parties all expressly agree and acknowledge that the State of Colorado has a reasonable relationship to the parties and/or this Agreement. As to any dispute, claim or litigation arising out of or relating in any way to this Agreement or the transaction contemplated hereby, the parties hereto hereby agree and consent to be subject to the exclusive jurisdiction of any state court, or federal court of the United States of America, sitting in Denver, Colorado, and any appellate court from any thereof. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, (a) any objection that it may now or hereafter have to laying venue of any suit, action or proceeding brought in such court, (b) any claim that any suit, action or proceeding brought in such court has been brought in an inconvenient forum, and (c) any defense that it may now or hereafter have based on lack of personal jurisdiction in such forum.

(i)        WAIVER OF JURY TRIAL . EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

(j)        Successors . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns

(k)        Cooperation . Each of the Selling Stockholders and the Company agrees to reasonably cooperate with the other parties and, at their own cost, time being of the essence, to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by such party to evidence or reflect the transactions contemplated by this Agreement and to carry out the intent and purpose of this Agreement.

(l)        Severability . If any term or other provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect so long as the economic or legal substance of this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible.

(m)        Specific Performance; Injunctive Relief . The parties hereto acknowledge that the parties shall be irreparably harmed and that there shall be no adequate remedy at law for a violation of any of the covenants or agreements of the other parties set forth in this Agreement. Therefore, each party hereby agrees that, in addition to any other remedies that may be available to the Selling Stockholders or the Company, as applicable upon any such violation, such party shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means to which they are entitled at law or in equity.

(n)        Representation . This Agreement was negotiated by the parties with the benefit of legal representation, or such representation was affirmatively considered and not sought, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation thereof.

(Signature Page Follow)

IN WITNESS WHEREOF, the parties have executed this Preferred Stock Option Agreement as of the date first written above.

Exhibit A

NOTICE OF EXERCISE

TO: Selling Stockholders

The undersigned, on behalf of Surna Inc. (the “Company”), hereby exercises the option to purchase __________ shares of Preferred Stock of the Company, as provided in the Preferred Stock Option Agreement dated as of May 29, 2018, against delivery of _____________ shares of Common Stock of the Company.

The undersigned hereby represents and warrants that it is the Company’s intention to acquire the aforesaid shares of Preferred Stock of the Company for its own account.