MASTER TERMS AND CONDITIONS TO SALES AGREEMENT


1. VALIDITY OF OFFER: Buyer shall indicate acceptance of this Agreement by returning a copy of this Agreement signed by a duly authorized representative of Buyer. If Buyer has not yet indicated acceptance of this Agreement, Surna’s offer to perform under the Agreement, shall terminate on the earlier of (i) Surna’s notification (whether verbal or written) to Buyer that such offer has been terminated, (ii) thirty (30) days after the contract date listed on page 1 of the Sales Agreement, or (iii) thirty (30) days after Buyer’s receipt of this Agreement. This Agreement may be subject to credit approval by Surna. Upon disapproval of credit, Surna may delay or suspend performance or, at its option, renegotiate prices and/or terms and conditions with Buyer. If Surna and Buyer are unable to agree on such revisions, this Agreement shall be cancelled, prior to execution of agreement, without any liability.

2. SCHEDULE OF DELIVERY: Surna will use best efforts to provide the Deliverables in accordance with the schedule of production and shipment, but does not guarantee such shipment. Time is not of the essence in this Agreement and Surna is not liable for any lost profits or consequential damages suffered by Buyer or any third party for any reason. If there is a change in the scope of work or if Surna falls behind schedule due to the actions of Buyer or any third party, the parties will adjust the schedule to afford Surna a reasonable opportunity to perform the outstanding work.

3. PAYMENT TERMS: Unless otherwise stated herein, a deposit of fifty percent (50%) of the total agreement price is due upon acceptance by signature of Agreement, a progress payment of twenty-five percent (25%) of the total Agreement price is due upon acceptance and sign-off of engineering drawings, the remaining twenty-five percent (25%) of the total Agreement price is due prior to the shipment of equipment. For early engineering only contracts, the buyer agrees to prepay 5% of the total Agreement price for placement & specification drawings, (Phase 1) and/or 10% of the total Agreement price for system detail drawings for permitting, (Phase 2). Buyer has five (5) business days from placing the order to cancel the order and receive a refund of their deposit, less 10% to cover administrative costs. After five (5) business days, any cancellation will result in forfeiture of the deposit. Remaining invoice(s), if any, will be submitted on a percent complete basis, with payment due upon receipt of invoice. Buyer agrees that shipment of goods may or may not, at Surna’s discretion, be initiated prior to receipt of full payment of completed goods and that payment is considered received upon clearance of payment at Surna’s bank. Buyer agrees that remaining balance will be paid promptly upon invoice and understands that goods subject to payments over 30 days from invoice date will be subject to storage fees equivalent to 2% of the total order as well as a service charge equal to the lesser of the maximum allowable legal interest rate or 2% of the amount due at the end of each month. Unless otherwise agreed in writing, a balance due and unpaid 60 days from invoice date may be subject to order cancellation and forfeiture of deposit at seller’s sole discretion. Buyer shall pay all costs (including attorneys’ fees) incurred by Surna in attempting to collect amounts due and otherwise enforcing these terms and conditions. If requested, Surna will provide appropriate lien waivers upon receipt of payment. Surna may at any time decline to ship, make delivery, or perform work except upon receipt of payment or upon other terms and conditions satisfactory to Surna.

4. TRANSPORTATION & RISK OF LOSS: Products are sold F.O.B., at the Surna plant producing the equipment included in the Deliverables. Buyer’s sole recourse for products damaged in transit is against the carrier. Buyer may specify a preferred carrier, which Surna will utilize if practical and if freight is not already included in the Deliverables. Products will be shipped under a straight bill of lading naming Buyer as consignee, and freight costs shall be included in the Deliverables, with a standard handling fee added. Delivery will be made to the shipping address and the Agreement shall be considered complete when Buyer’s representative signs the bill of lading unless project management and/or installation services are included as a part of the Deliverables.

5. DELAY OF SHIPMENT: If Buyer delays shipment or installation of the completed order beyond thirty (30) days from the applicable scheduled date, Surna will be considered to have performed all conditions of this Agreement. Any delay in shipment caused by Buyer’s actions will subject prices to increase equal to the percentage increase in list prices during that period of delay. In no event will prices be decreased. At Buyer’s request, Surna will arrange for storage of the products, and Buyer will be invoiced for the total order. Buyer agrees to pay the complete remaining balance immediately on presentation of the invoice and prior to the products being released for shipment or installation. If shipment or installation continues to be delayed beyond sixty (60) days from the scheduled date, a storage and handling charge will be charged by Surna.

6. CANCELLATION: Equipment is specially manufactured in response to orders. An order placed with and accepted by Seller cannot be delayed, canceled, suspended, or extended except with Seller’s written consent and upon written terms accepted by Seller that will reimburse Seller for and indemnify Seller against loss and provide Seller with a reasonable profit for its materials, time, labor, services, use of facilities, and otherwise. Buyer will be obligated to accept any Equipment shipped, tendered for delivery, or delivered by Seller pursuant to the order prior to any agreed delay, cancellation, suspension, or extension of the order. Any attempt by Buyer to unilaterally revoke, delay, or suspend acceptance for any reason whatsoever after it has agreed to delivery of or accepted any shipment shall constitute a breach of this Agreement. For purposes of this paragraph, acceptance occurs by any waiver of inspection, use, or possession of Equipment, payment of the invoice, or any indication of exclusive control exercised by Buyer.

7. CLAIMS: Buyer must make all claims for shortages and damaged products in writing within three days from receipt of the products; otherwise such claim shall be deemed waived. Claims for damage in transit must be to the delivery carrier on receipt of shipment, as delivery to the carrier absolves Surna of further responsibility. No products may be returned for credit except by written Surna authorization. Surna’s liability for losses or damage from all causes shall in no event exceed the purchase price.

8. TITLE/DEFAULT: Buyer agrees that, unless Buyer makes full payment in advance, Surna will have a purchase money security interest in all Equipment to secure payment in full of all amounts due Surna and its order for the Equipment, together with these terms and conditions, form a security agreement (as defined by the UCC in the United States and as defined in the Personal Property Security Act in Canada). Buyer shall keep the Equipment free of all taxes and encumbrances, shall not remove the Equipment from its original installation point and shall not assign or transfer any interest in the Equipment until all payments due Surna have been made. The purchase money security interest granted herein attaches upon Surna’s acceptance of Buyer’s order and on receipt of the Equipment described in the accepted Proposal but prior to its installation. The parties have no agreement to postpone the time for attachment unless specifically noted in writing on the accepted order. Buyer will have no rights of set off against any amounts, which become payable to Surna under this Agreement or otherwise.

9. TAXES AND/OR DUTIES: Buyer is required to pay all taxes in connection with the sale, purchase, delivery, and use of any of the goods (except for taxes based upon Surna’s net income). The Agreement Price does not include any present or future foreign, federal, state, or local property, license, privilege, sales, use, excise, value added, gross receipts, or other like taxes or assessments. Such amounts will be itemized separately to Buyer, who will make prompt payment to Surna. Buyer agrees that shipment of goods may be delayed until Surna’s receipt of full payment including any required taxes.

10. WARRANTY: For equipment manufactured by Surna, Surna shall warrant the equipment until the earlier of twelve (12) months from initial start-up or eighteen (18) months from date of shipment against failure due to defects in material and/or manufacturing to the capacities and ratings set forth in Company’s catalogs and bulletins (“Warranty”). Equipment, material, and/or parts that are not manufactured directly by Surna are not warranted by Surna and carry such warranties as may be extended by the respective manufacturer. Exclusions from this Warranty include damage or failure arising from: wear and tear; corrosion, erosion, deterioration; modifications made by others to the Equipment; repairs or alterations by a party other than Company that adversely affects the stability or reliability of the Equipment; vandalism; neglect; accident; adverse weather or environmental conditions; abuse or improper use; improper installation; commissioning by a party other than Surna; unusual physical or electrical or mechanical stress; operation with any accessory, equipment or part not specifically approved by Surna; refrigerant or glycol not recommended or supplied by Surna; and/or lack of proper start-up or maintenance as recommended by Surna. Surna shall not be obligated to pay for the cost of lost refrigerant or lost product or any other direct, indirect, or consequential damages. Surna’s obligations and liabilities under this Warranty are limited to furnishing replacement equipment or OEM parts, at its option, FCA (Incoterms 2000) factory or warehouse (f.o.b. factory or warehouse for US domestic purposes) at Surna-designated shipping point, freight-allowed to Surna’s warranty agent’s stock location, for all non-conforming Surna-manufactured Equipment which have been returned by Buyer to Surna. Returns must have prior written approval by Surna and are subject to restocking and replacement charges where applicable. No warranty liability whatsoever shall attach to Surna until Buyer’s complete order has been paid for in full and Surna’s liability under this Warranty shall be limited to the purchase price of the Equipment shown to be defective. Additional warranty and service protection is available on an extra-cost basis and must be in writing and agreed to by an authorized signatory of the Surna. The warranty excludes: (a) labor, transportation and related costs incurred by Buyer; (b) reinstallation costs of repaired equipment; (c) reinstallation costs of replacement equipment; (d) consequential damages of any kind; and, (e) reimbursement for loss caused by interruption of service.

EQUIPMENT MANUFACTURED BY SURNA THAT INCLUDES A REQUIRED START-UP AND SOLD IN NORTH AMERICA WILL NOT BE WARRANTED BY COMPANY UNLESS SURNA OR ITS AUTHORIZED AGENT PERFORMS THE EQUIPMENT STARTUP. SURNA MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING PREVENTION OF MOLD/MOULD, FUNGUS, BACTERIA, MICROBIAL GROWTH, OR ANY OTHER CONTAMINATES. EXCEPT FOR SURNA’S WARRANTY EXPRESSLY SET FORTH HEREIN, SURNA DOES NOT MAKE, AND HEREBY EXPRESSLY DISCLAIMS, ANY WARRANTIES, EXPRESS OR IMPLIED CONCERNING ITS PRODUCTS, EQUIPMENT OR SERVICES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF DESIGN, MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE, OR OTHERS THAT ARE ALLEGED TO ARISE FROM COURSE OF DEALING OR TRADE.

11. INCORPORATION OF SAFETY INFORMATION: Buyer acknowledges receipt of all written safety information related to the safe use of the Deliverables including, without limitation, information related to installation, location, maintenance, use, and warning signs verbiage. Buyer further acknowledges that it has reviewed all such safety information and hereby indemnifies, releases and discharges Surna from and against any and all liabilities, costs or expenses of injuries or damages to any third party as a result of any use of the Deliverables that is not in accordance with such safety information.

12. PERFORMANCE: Surna shall be obligated to furnish only the Equipment described in the Proposal and in submittal data (if such data is issued in connection with the order). Surna may rely on the acceptance of the Proposal, in submittal data, and in approved drawings as acceptance of the suitability of the Equipment for the particular project or location. Unless specifically stated in the Proposal, compliance with any local building codes or other laws or regulations relating to specifications or the location, use, or operation of the Equipment is the sole responsibility of Buyer. If Equipment is tendered that does not fully comply with the provisions of this Agreement, and Equipment is rejected by Buyer, Surna will have the right to cure within a reasonable time after notice thereof by substituting a conforming tender whether or not the time for performance has passed.

13. LIMITATION OF LIABILITY: Except for the indemnification obligations, neither party is liable to the other for consequential, incidental, indirect or special damages, including commercial loss and lost profits, however caused, in excess of the fees paid under this Agreement.

14. INTELLECTUAL PROPERTY; PATENT INDEMNITY: Seller retains all ownership, license, and other rights to all patents, trademarks, copyrights, trade secrets, and other intellectual property rights related to the Equipment, and, except for the right to use the Equipment sold, Buyer obtains no rights to use any such intellectual property. Seller agrees to defend any suit or proceeding brought against Buyer so far as such suit or proceeding is solely based upon a claim that the use of the Equipment provided by Seller constitutes infringement of any patent of the United States of America, provided Seller is promptly notified in writing and given authority, information, and assistance for defense of same. Seller will, at its option, procure for Buyer the right to continue to use said Equipment, or modify it so that it becomes non-infringing, or replace same with non-infringing Equipment, or to remove said Equipment and to refund the purchase price. The foregoing will not be construed to include any Agreement by Seller to accept any liability whatsoever in respect to patents for inventions including more than the Equipment furnished hereunder, or in respect of patents for methods and processes to be carried out with the aid of said Equipment. The provision of Equipment by Seller does not convey any license, by implication, estoppel, or otherwise, under patent claims covering combinations of said Equipment with other devices or elements. The foregoing states the entire liability of Seller with regard to patent infringement. Notwithstanding the provisions of this paragraph, Buyer will hold Seller harmless against any expense or loss resulting from infringement of patents or trademarks arising from compliance with Buyer’s designs or specifications or instructions.

15. INDEMNIFICATION: To the fullest extent permitted by law, Surna and Buyer shall indemnify, defend, and hold harmless each other from any and all claims, actions, costs, expenses, damages, and liabilities, including reasonable attorneys’ fees, resulting from death or bodily injury or damage to real or personal property, to the extent caused by the negligence or misconduct of their respective employees or other authorized agents in connection with their activities within the scope of this Agreement. Neither party shall indemnify the other against claims, damages, expenses, or liabilities to the extent attributable to the acts or omissions of the other party. If the parties are both at fault, the obligation to indemnify shall be proportional to their relative fault. The duty to indemnify will continue in full force and effect, notwithstanding the expiration or early termination hereof, with respect to any claims based on facts or conditions that occurred prior to expiration or termination.

16. CONFIDENTIALITY: “Confidential Information” means any and all business, technical or third party information (including without limitation specifications, drawings, sketches, models, samples or documentation) marked as confidential or proprietary (or which a party knows or has reason to know is proprietary) and provided, disclosed, or made available under this Agreement. The parties shall restrict access to the Confidential Information to employees or agents who have a “need to know.” The parties, employees, or agents shall not disclose the Confidential Information to any third party and shall treat the Confidential Information in the same way it treats its own Confidential Information of like kind. This provision will not apply to information which is in the public domain, is previously known to the receiving party without obligation of confidentiality, is independently developed by the receiving party from a third party that does not have an obligation to keep the information confidential.

17. INSTALLATION: If the Agreement calls for installation or installation supervision to be performed by Surna, the following terms and conditions shall apply:

a. Buyer shall be responsible for the preparation of the site for installation of the Deliverables, including, without limitation, all of the following, as applicable: unloading the delivery trucks and providing secure storage as appropriate; providing Surna unencumbered access to the site; providing electrical services and running water; plumbing connections, completing concrete foundations and installing imbedded items. In addition, Buyer shall provide the following services, as applicable, during the course of the installation process: skilled laborers in accordance with the Surna Supervisor’s on-site requests and direction; heavy equipment including hand-tools, fork-lifts and cranes; on-site electrical and/or air connections, conduit, wiring or transformers, from the control room to the Deliverables; on-site disposal of product packaging materials; and overhead and/or wall preparation and painting work.

b. At least ten (10) days prior to the system commissioning date Surna must have received a signed site confirmation checklist and commitment from Buyer that all site preparations will be complete as specified on the plans upon the scheduled arrival of the commissioning technician.

c. Changes to the commissioning date which occur within ten (10) days or less of the scheduled date will result in additional charges for which Buyer will be invoiced separately.

d. Surna reserves the right to use subcontractors to perform all or part of the commissioning requirements.

e. Construction permits and fees, if required, are the responsibility of the Buyer. Any inspections, changes or modifications to Surna’s plans or installed product required by a governmental or quasi-governmental agency or authority are outside the scope of this Agreement and not included in the fees, and are the Buyer’s sole responsibility.

f. Buyer agrees to produce a “punch-list” of unfinished or unsatisfactory items, in writing, at the time of the initial start-up, for which Surna shall review with Buyer and mutually agree on an acceptable plan of action.

g. If the Agreement calls for Surna to provide installation supervision, Buyer acknowledges and agrees that such supervision is only for the installation of major components of the Deliverables, and that Surna will not be liable for any negligence, intentional acts or willful misconduct of Buyer’s subcontractors, agents or employees that are performing the installation.

18. PRODUCT EXCLUSIONS: Buyer acknowledges that the Deliverables do not include the following items that may be necessary for proper operation and/or installation: stamped, sealed, or site specific engineering drawings or calculations beyond what has been specified in the Statement of Services; concrete footings or structural support systems; anchor bolts or fasteners for connecting the equipment to the concrete, ceiling, or walls; grouting or applicable material to cover exposed anchor bolts, or wall perforations; plumbing, air, or electrical lines; filters, strainers, water treatment systems; air compressor, compressor installation and housing; handicap access within the space or to enter the space; and signage.

19. NOTICES: Notices required under this Agreement shall be sent to the addresses of the parties stated on page 1 of the Sales Agreement. Notices will be deemed given (a) when delivered, if sent by registered or certified mail (return receipt requested), (b) when delivered, if delivered personally, (c) on the date of a facsimile, if the transmittal form showing a successful transmittal is retained by the sender, and such facsimile communication is followed by mailing a copy to the addressee.

20. GOVERNING LAW; VENUE: Except as provided below, to the maximum extent provided by law, this Agreement is made and shall be interpreted and enforced in accordance with the laws of the state of Colorado without regard to its conflict of law principles that might otherwise call for the application of a different state’s law, and not including the United Nations Convention on Contracts for the International Sale of Goods. Any action or suit arising out of or related to this Agreement must be commenced within one year after the cause of action has accrued. To the extent the Equipment is being used at a site owned and/or operated by any agency of the Federal Government, determination of any substantive issue of law shall be according to the Federal common law of Government contracts as enunciated and applied by Federal judicial bodies and boards of contract appeals of the Federal Government. This Agreement contains all of the agreements, representations and understandings of the parties and supersedes all previous understandings, commitments or agreements, oral or written, related to the subject matter hereof. This Agreement may not be amended, modified, or terminated except by a writing signed by the parties hereto. No documents shall be incorporated herein by reference except to the extent Seller is a signatory thereon. If any term or condition of this Agreement is invalid, illegal, or incapable of being enforced by any rule of law, all other terms and conditions of this Agreement will nevertheless remain in full force and effect as long as the economic or legal substance of the transaction contemplated hereby is not affected in a manner averse to any party hereto. Buyer may not assign, transfer, or convey this Agreement, or any part hereof, or its right, title, or interest herein, without the written consent of the Seller. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of Buyer’s permitted successors and assigns.

21. FORCE MAJEURE: Surna’s duty to perform under this Agreement and the Equipment prices are contingent upon the non-occurrence of an Event of Force Majeure. An “Event of Force Majeure” shall mean any cause or event beyond the control of Surna. Without limiting the foregoing, “Event of Force Majeure” includes: acts of God; acts of terrorism, war or the public enemy; flood; earthquake; tornado; storm; fire; civil disobedience; pandemic insurrections; riots; labor/labour disputes; labor/labour or material shortages; sabotage; restraint by court order or public authority (whether valid or invalid); and action or non-action by or inability to obtain or keep in force the necessary governmental authorizations, permits, licenses, certificates or approvals if not caused by Surna; and the requirements of any applicable government in any manner that diverts either the material or the finished product to the direct or indirect benefit of the government. If Surna shall be unable to carry out any material obligation under this Agreement due to an Event of Force Majeure, this Agreement shall at Surna’s election (i) remain in effect but Surna’s obligations shall be suspended until the uncontrollable event terminates or (ii) be terminated upon 10 days’ notice to Buyer, in which event Buyer shall pay Surna for all parts of the Work furnished to the date of termination.

22. BUYER BREACH: Each of the following events or conditions shall constitute a breach by Buyer and shall give Seller the right, without an election of remedies, to terminate this Agreement or temporarily suspend performance by delivery of written notice: (a) Any failure by Buyer to pay amounts when due; or (b) any general assignment by Buyer for the benefit of its creditors, or if Buyer becomes bankrupt or insolvent or takes the benefit of any statute for bankrupt or insolvent debtors, or makes or proposes to make any proposal or arrangement with creditors, or if any steps are taken for the winding up or other termination of Buyer or the liquidation of its assets, or if a trustee, receiver, or similar person is appointed over any of the assets or interests of Buyer; (c) Any representation or warranty furnished by Buyer in connection with this Agreement is false or misleading in any material respect when made; or (d) Any failure by Buyer to perform or comply with any material provision of this Agreement. Buyer shall be liable to the Seller for all Equipment furnished and all damages sustained by Seller (including lost profit and overhead).

23. EXPORT LAWS: The obligation of Seller to supply Equipment under this Agreement is subject to the ability of Seller to supply such items consistent with applicable laws and regulations of the United States and other governments. Seller reserves the right to refuse to enter into or perform any order, and to cancel any order, under this Agreement if Seller in its sole discretion determines that performance of the transaction to which such order relates would violate any such applicable law or regulation. Buyer will pay all handling and other similar costs from Seller’s factories including the costs of freight, insurance, export clearances, import duties, and taxes. Buyer will be “exporter of record” with respect to any export from the United States of America and will perform all compliance and logistics functions in connection therewith and will also comply with all applicable laws, rules, and regulations. Buyer understands that Seller and/or the Equipment are subject to laws and regulations of the United States of America which may require licensing or authorization for and/or prohibit export, re-export or diversion of Seller’s Equipment to certain countries, and agrees it will not knowingly assist or participate in any such diversion or other violation of applicable United States of America or individual state laws and regulations. Buyer agrees to hold harmless and indemnify Seller for any damages resulting to Buyer or Seller from a breach of this paragraph by Buyer.

24. LIMITED WAIVER OF SOVEREIGN IMMUNITY: If Buyer is an Indian tribe (in the U.S.) or a First Nation or Band Council (in Canada), Buyer, whether acting in its capacity as a government, governmental entity, a duly organized corporate entity or otherwise, for itself and for its agents, successors, and assigns: (1) hereby provides this limited waiver of its sovereign immunity as to any damages, claims, lawsuit, or cause of action (herein “Action”) brought against Buyer by Seller and arising or alleged to arise out of the furnishing by Seller of any product or service under this Agreement, whether such Action is based in contract, tort, strict liability, civil liability or any other legal theory; (2) agrees that jurisdiction and venue for any such Action shall be proper and valid (a) if Buyer is in the U.S., in any state or United States court located in the state in which Seller is performing this Agreement or (b) if Buyer is in Canada, in the superior court of the province or territory in which the work was performed; (3) expressly consents to such Action, and waives any objection to jurisdiction or venue; (4) waives any requirement of exhaustion of tribal court or administrative remedies for any Action arising out of or related to this Agreement; and (5) expressly acknowledges and agrees that Seller is not subject to the jurisdiction of Buyer’s tribal court or any similar tribal forum, that Buyer will not bring any action against Seller in tribal court, and that Buyer will not avail itself of any ruling or direction of the tribal court permitting or directing it to suspend its payment or other obligations under this Agreement. The individual signing on behalf of Buyer warrants and represents that such individual is duly authorized to provide this waiver and enter into this Agreement and that this Agreement constitutes the valid and legally binding obligation of Buyer, enforceable in accordance with its terms.

25. WAIVER: The failure of Surna to insist upon strict performance of any of the terms of this Agreement or to exercise any rights conferred in this Agreement, shall not be construed as a waiver or relinquishment of the right to assert or rely upon any such terms or rights at any future occasion.

26. ASSIGNMENT: The rights and obligations under this Agreement may not be assigned without the prior written consent of the non-assigning Party; provided however, that Surna may assign its rights and obligations under this Agreement to an affiliate or pursuant to a sale of substantially all of the assets or ownership of Surna.

27. COUNTERPARTS AND ELECTRONIC DOCUMENTS: This Agreement may be executed and delivered in counterparts, including by a facsimile or an electronic transmission thereof, each of which shall be deemed an original, but all together shall constitute but one and the same Agreement. Any document generated by the parties with respect to this Agreement, including this Agreement, may be imaged and stored electronically and introduced as evidence in any proceeding as if original business records. Neither party will object to the admissibility of such images as evidence in any proceeding on account of having been stored electronically.

28. ENTIRE AGREEMENT: This Agreement (including the Master Terms and Conditions) is intended to be the final, complete and exclusive expression of the Agreement between the parties. This Sales Agreement supersedes any and all prior written or oral agreements relating to the subject matter hereof. No modification of this Agreement shall be effective except by a written agreement expressly stating the parties’ intent to so modify this Agreement and signed by the parties. No modification of any provision of this Agreement shall be considered a waiver, breach, or cancellation of any other provision of this Agreement. Any provision in the Sales Agreement that is not consistent with the Master Terms and Conditions in this Exhibit A shall be void and not a part of this Sales Agreement.