Exhibit 10.05

 

TRANSITION SERVICES AGREEMENT

 

This Transition Services Agreement, dated as of May 5, 2020 (this “Agreement”),
is entered into by and among CUI-Canada, Inc., a Canadian corporation
(“Seller”), CUI Global, Inc., a Colorado corporation (“Parent”), and Virtual
Power Systems, Inc., a Delaware corporation (“Buyer”).

 

RECITALS

 

WHEREAS, Buyer, Seller and Parent have entered into that certain Asset Purchase
Agreement, dated as of March 30, 2019 (the “Purchase Agreement”), pursuant to
which Seller and Parent have agreed to sell and assign to Buyer, and Buyer has
agreed to purchase and assume from Seller and Parent, certain assets and
liabilities of Seller and Parent, all as more fully described therein;

 

WHEREAS, in order to ensure an orderly transition of the Business to Buyer and
as a condition to consummating the transactions contemplated by the Purchase
Agreement, Buyer, Seller, and Parent have agreed to enter into this Agreement,
pursuant to which the parties will provide, or cause its Affiliates to provide,
certain of the other parties with certain services, in each case on a
transitional basis and subject to the terms and conditions set forth herein; and

 

WHEREAS, capitalized terms used herein and not otherwise defined shall have the
meaning ascribed to such terms in the Purchase Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, Buyer, Seller, and Parent hereby agree as follows:

 

ARTICLE I

SERVICES

 

Section 1.01 Provision of Services.

 

(a)     Seller, Parent, and Buyer each agree to provide, or to cause their
respective Affiliates to provide, the services (the “Services”) set forth on the
exhibits attached hereto (as such exhibits may be amended or supplemented
pursuant to the terms of this Agreement, collectively, the “Service Exhibits”)
to other of the parties for the respective periods and on the other terms and
conditions set forth in this Agreement and in the respective Service Exhibits.

 

(b)     Notwithstanding the contents of the Service Exhibits, Seller, Parent,
and Buyer agree to respond in good faith to any reasonable request by the other
parties hereto for access to any additional services that are necessary for the
operation of the Business or the Seller, as the case may be and which are not
currently contemplated in the Service Exhibits, at a price to be agreed upon
after good faith negotiations between the parties. Any such additional services
so provided by Seller, Parent, or Buyer, shall constitute Services under this
Agreement and be subject in all respect to the provisions of this Agreement as
if fully set forth on a Service Exhibit as of the date hereof.

 

(c)     The parties hereto acknowledge the transitional nature of the Services.
Accordingly, as promptly as practicable following the execution of this
Agreement, Seller, Parent, and Buyer each agree to use commercially reasonable
efforts to make a transition of each Service to their respective own internal
organizations or to obtain alternate third-party sources to provide the
Services.

 

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(d)      Subject to Section 2.03 and Section 2.04, the obligations of each party
under this Agreement to provide Services shall terminate with respect to each
Service on the end date specified in the applicable Service Exhibit (the “End
Date”). Notwithstanding the foregoing, the parties acknowledge and agree that
each party may determine from time to time that it does not require all the
Services set out on one or more of the Service Exhibits or that it does not
require such Services for the entire period up to the applicable End Date.
Accordingly, any party may terminate any Service, in whole and not in part, upon
notification to the appropriate other party in writing of any such
determination.

 

Section 1.02 Standard of Service.

 

(a)     Seller and Parent each represent, warrant and agree that the Services
they provide shall be provided in good faith, in accordance with applicable law
and, except as specifically provided in the Service Exhibits, in a manner
generally consistent with the historical operation of the Business and with the
same standard of care as historically provided to the Business. Seller and
Parent each agree to assign sufficient resources and qualified personnel as are
reasonably required to perform the Services in accordance with the standards set
forth in the preceding sentence.

 

(b)     Buyer represents, warrants, and agrees that the Services it provides
shall be provided in good faith, in accordance with applicable law and, except
as specifically provided in the Service Exhibits, in a manner generally
consistent with the historical operation of the Seller and with the same
standard of care as historically provided by Seller. Buyer agrees to assign
sufficient resources and qualified personnel as are reasonably required to
perform its Services in accordance with the standards set forth in the preceding
sentence.

 

(c)     Except as expressly set forth above in this Section 1.02 or in any
contract entered into hereunder, none of Seller, Parent, or Buyer makes any
representations or warranties of any kind, implied or expressed, with respect to
the Services, including, without limitation, any warranties of merchantability
or fitness for a particular purpose, which are specifically disclaimed. Seller,
Parent, and Buyer each acknowledge and agree that this Agreement does not create
a fiduciary relationship, partnership, joint venture or relationships of trust
or agency between the parties and that all Services are provided by the parties
hereto as independent contractors.

 

Section 1.03 Access to Premises. In order to enable the provision of the
Services each party agrees that it shall provide to the other parties and their
respective Affiliates’ employees and any third-party service providers or
subcontractors who provide Services, at no cost to the providing party, access
to the receiving party’s facilities, assets and books and records, in all cases
to the extent necessary for the providing party to fulfill their obligations
under this Agreement.

 

 

ARTICLE II

COMPENSATION

 

 

Section 2.01 Responsibility for Wages and Fees. For such time as any employees
of any party providing Services pursuant hereto or any of their respective
Affiliates are providing the Services to any other party under this Agreement,
(a) such employees will remain employees of such providing party or such
Affiliate, as applicable, and shall not be deemed to be employees of any party
receiving Services for any purpose, and (b) such party providing Services, or
such Affiliate, as applicable, shall be solely responsible for the payment and
provision of all wages, bonuses and commissions, employee benefits, including
severance and worker’s compensation, and the withholding and payment of
applicable taxes relating to such employment.

 

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Section 2.02 Terms of Payment and Related Matters.

 

(a)     As consideration for provision of the Services, each party receiving
Services shall pay the amount specified for each Service on such Service’s
respective Service Exhibit.

 

(b)     It is the intent of the parties that the compensation set forth in the
respective Service Exhibits reasonably approximate the cost of providing the
Services, including the cost of employee wages and compensation, without any
intent to cause any party providing Services to receive profit or incur loss. If
at any time any party providing Services believes that the payments contemplated
by a specific Service Exhibit are materially insufficient to compensate it for
the cost of providing the Services it is obligated to provide hereunder, or any
party receiving Services believes that the payments contemplated by a specific
Service Exhibit materially overcompensates the providing party, such providing
or receiving party, as the case may be, shall notify the other party in writing
as soon as possible, and the parties hereto will commence good faith
negotiations toward an agreement in writing as to the appropriate course of
action with respect to pricing of such Services for future periods.

 

Section 2.03 Extension of Services. The parties agree that no party providing
Services shall be obligated to perform any Service after the applicable End
Date; provided, however, that if a party receiving Services desires and the
providing party agrees to continue to perform any of the Services after the
applicable End Date, the parties shall negotiate in good faith to determine an
amount that compensates the providing party for all of its costs for such
performance, including the time of its employees. The Services so performed by
the providing party after the applicable End Date shall continue to constitute
Services under this Agreement and be subject in all respects to the provisions
of this Agreement for the duration of the agreed-upon extension period.

 

Section 2.04 Terminated Services. Upon termination or expiration of any or all
Services pursuant to this Agreement, or upon the termination of this Agreement
in its entirety, no party providing Services will have any further obligation to
provide the applicable terminated Services and the party receiving Services will
have no obligation to pay any future compensation relating to such Services
(other than for or in respect of Services already provided in accordance with
the terms of this Agreement and received by the receiving party prior to such
termination).

 

Section 2.05 Right of Set-off. Buyer shall have the right to withhold and set
off against any amount otherwise due to be paid by Buyer pursuant to this
Agreement any amount to which any Buyer Indemnified Party may be entitled under
Article VI of the Purchase Agreement or Section 5.02 of this Agreement.

 

ARTICLE III

TERMINATION

 

Section 3.01 Termination of Agreement. Subject to Section 3.04, this Agreement
shall terminate in its entirety (i) on the date upon which no party providing
Services shall have any continuing obligation to perform any Services as a
result of each of their expiration or termination in accordance with Section
1.01(d) or Section 3.02 or (ii) in accordance with Section 3.03.

 

Section 3.02 Breach. Any party (the “Non-Breaching Party”) may terminate this
Agreement with respect to any Service, in whole but not in part, at any time
upon prior written notice to the other party (the “Breaching Party”) if the
Breaching Party has failed to perform any of its material obligations under this
Agreement relating to such Service, and such failure shall have continued
without cure for a period of ten (10) days after receipt by the Breaching Party
ofa written notice of such failure from the Non-Breaching party seeking to
terminate such service.

 

Section 3.03 Insolvency. In the event that any party hereto shall (i) file a
petition in bankruptcy, (ii) become or be declared insolvent, or become the
subject of any proceedings (not dismissed within ninety (90) days) related to
its liquidation, insolvency or the appointment of a receiver, (iii) make an
assignment on behalf of all or substantially all of its creditors, or (iv) take
any corporate action for its winding up or dissolution, then the other party
shall have the right to terminate this Agreement by providing written notice in
accordance with Section 6.01.

 

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Section 3.04 Effect of Termination. Upon termination of this Agreement in its
entirety pursuant to Section 3.01, all obligations of the parties hereto shall
terminate, except for the provisions of Section 2.04, Article IV, Article V and
Article VI, which shall survive any termination or expiration of this Agreement.

 

ARTICLE IV

CONFIDENTIALITY

 

Section 4.01 Confidentiality.

 

(a)     During the term of this Agreement and thereafter, the parties hereto
shall, and shall instruct their respective representatives to, maintain in
confidence and not disclose the other party’s financial, technical, sales,
marketing, development, personnel, and other information, records, or data,
including, without limitation, customer lists, supplier lists, trade secrets,
designs, product formulations, product specifications or any other proprietary
or confidential information, however recorded or preserved, whether written or
oral (any such information, “Confidential Information”). Each party hereto shall
use the same degree of care, but no less than reasonable care, to protect the
other party’s Confidential Information as it uses to protect its own
Confidential Information of like nature. Unless otherwise authorized in any
other agreement between the parties, any party receiving any Confidential
Information of the other party (the “Receiving Party”) may use Confidential
Information only for the purposes of fulfilling its obligations under this
Agreement (the “Permitted Purpose”). Any Receiving Party may disclose such
Confidential Information only to its representatives who have a need to know
such information for the Permitted Purpose and who have been advised of the
terms of this Section 4.01 and the Receiving Party shall be liable for any
breach of these confidentiality provisions by such persons; provided, however,
that any Receiving Party may disclose such Confidential Information to the
extent such Confidential Information is required to be disclosed by a
governmental order, in which case the Receiving Party shall promptly notify, to
the extent possible, the disclosing party (the “Disclosing Party”), and take
reasonable steps to assist in contesting such governmental order or in
protecting the Disclosing Party’s rights prior to disclosure, and in which case
the Receiving Party shall only disclose such Confidential Information that it is
advised by its counsel in writing that it is legally bound to disclose under
such governmental order.

 

(b)     Notwithstanding the foregoing, “Confidential Information” shall not
include any information that the Receiving Party can demonstrate: (i) was
publicly known at the time of disclosure to it, or has become publicly known
through no act of the Receiving Party or its representatives in breach of this
Section 4.01; (ii) was rightfully received from a third party without a duty of
confidentiality; or (iii) was developed by it independently without any reliance
on the Confidential Information.

 

(c)     Upon demand by the Disclosing Party at any time, or upon expiration or
termination of this Agreement with respect to any Service, the Receiving Party
agrees promptly to return or destroy, at the Disclosing Party’s option, all
Confidential Information. If such Confidential Information is destroyed, an
authorized officer of the Receiving Party shall certify to such destruction in
writing.

 

ARTICLE V

LIMITATION ON LIABILITY; INDEMNIFICATION

 

Section 5.01 Limitation on Liability. In no event shall any party providing
Services pursuant hereto have any liability under any provision of this
Agreement for any punitive, incidental, consequential, special or indirect
damages, including loss of future revenue or income, loss of business reputation
or opportunity relating to the breach or alleged breach of this Agreement, or
diminution of value or any damages based on any type of multiple, whether based
on statute, contract, tort or otherwise, and whether or not arising from the
other party’s sole, joint, or concurrent negligence, strict liability, criminal
liability or other fault. Each party receiving Services hereunder acknowledges
that the Services to be provided to it hereunder are subject to, and that its
remedies under this agreement are limited by, the applicable provisions of
Section 1.02, including the limitations on representations and warranties with
respect to the Services.

 

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Section 5.02 Seller and Parent Indemnification. Subject to the limitations set
forth in Section 5.01, Seller and Parent shall jointly and severally indemnify,
defend and hold harmless Buyer and its Affiliates and each of their respective
representatives (collectively, the “Buyer Indemnified Parties”) from and against
any and all claims, judgments, damages, liabilities, settlements, losses, costs
and expenses, including attorneys’ fees and disbursements, of the Buyer
Indemnified Parties arising out of or resulting from (i) Seller or Parent’s
breach of this Agreement; or (ii) the negligence, violation of law, or willful
misconduct of Seller or Parent or their respective Affiliates.

 

Section 5.03 Buyer Indemnification. Subject to the limitations set forth in
Section 5.01, Buyer shall indemnify, defend and hold harmless Seller and Parent
and their Affiliates and each of their respective representatives (collectively,
the “Seller and Parent Indemnified Parties”) from and against any and all
claims, judgments, damages, liabilities, settlements, losses, costs and
expenses, including attorneys’ fees and disbursements, of the Seller and Parent
Indemnified Parties arising out of or resulting from (i) Buyer’s breach of this
Agreement; or (ii) the negligence, violation of law, or willful misconduct of
Buyer or its Affiliates.

 

Section 5.04 Indemnification Procedures. The process set forth in Section 6.4 of
the Purchase Agreement shall be deemed incorporated into, and made a part of,
this Agreement.

 

ARTICLE VI

MISCELLANEOUS

 

Section 6.01 Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been given: (a) when delivered by hand (with written confirmation of
receipt); (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business Day if sent
after normal business hours of the recipient; or (d) on the thirds day after the
date mailed, by certified or registered mail, return receipt requested, postage
prepaid. Such communications must be sent to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 6.01):

 

 

(a)

if to Seller:

    20050 SW 112th Avenue     Tualatin, OR 97062     E-mail:
wclough@cuiglobal.com     Attention: William Clough

 

 

 

(b)

if to Parent:

    20050 SW 112th Avenue     Tualatin, OR 97062     E-mail:
wclough@cuiglobal.com     Attention: William Clough

 

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(c)

if to Buyer:

          699 Milpitas Blvd     Milpitas, CA 95035     E-mail:
dean@virtualpowersystems.com     Attention: Dean Nelson           With a copy to
Sanjay Jain via email at     sanjay@virtualpowersystems.com

 

Section 6.02 Other Matters.

 

(a)

Salary Coverage. The parties agree and acknowledge that Seller will pay the full
and complete salary and all other expenses or fees of Mark Adams for his
services to Buyer, which services shall be set forth by the Chief Executive
Officer of Buyer, from time to time. For the avoidance of doubt, Buyer shall not
be responsible for any compensation, expenses or fees associated with Mr. Adams’
services to Buyer.

 

(b)

Investment Sourcing. Seller shall use reasonable efforts to assist Buyer in
sourcing investments in Buyer for no additional compensation.

 

Section 6.03 Headings. The headings in this Agreement are for reference only and
shall not affect the interpretation of this Agreement.

 

Section 6.04 Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, 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
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

 

Section 6.05 Entire Agreement. This Agreement, including all Service Exhibits,
constitutes the sole and entire agreement of the parties to this Agreement with
respect to the subject matter contained herein and supersedes all prior and
contemporaneous understandings and agreements, both written and oral, with
respect to such subject matter. In the event and to the extent that there is a
conflict between the provisions of this Agreement and the provisions of the
Purchase Agreement as it relates to the Services hereunder, the provisions of
this Agreement shall control. Seller agrees and acknowledges that (a) this
Agreement is in full satisfaction of the terms and conditions of Sections 5.4
and 5.5 of the Purchase Agreement of Buyer and Seller and (b) neither party is
entitled to any further consideration, cash, securities, or other items of value
from the other party (or its affiliates) under Sections 5.4 or 5.5 of the
Purchase Agreement or any other related agreement except as set forth in this
Agreement.

 

Section 6.06 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party may assign its rights or obligations hereunder
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld or delayed. No assignment shall relieve the assigning
party of any of its obligations hereunder.

 

Section 6.07 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever, under or by reason of this Agreement.

 

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Section 6.08 Amendment and Modification; Waiver. This Agreement may only be
amended, modified or supplemented by an instrument in writing signed by each
party hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and signed by the party so
waiving. No failure to exercise, or delay in exercising, any right, remedy,
power or privilege arising from this Agreement shall operate or be construed as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.

 

Section 6.09 Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
California without giving effect to any choice or conflict of law provision or
rule (whether of the State of Oregon or any other jurisdiction). Any legal suit,
action or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby may be instituted in the federal courts of the
United States of America or the courts of the State of California in each case
located in the city of Milpitas and county of Santa Clara, and each party
irrevocably submits to the exclusive jurisdiction of such courts in any such
suit, action or proceeding. The parties irrevocably and unconditionally waive
any objection to the laying of venue of any suit, action or any proceeding in
such courts and irrevocably waive and agree not to plead or claim in any such
court that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.

 

Section 6.10 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement. A signed copy of this Agreement delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Agreement.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

 

 

  SELLER             CUI-CANADA, INC                       5/6/2020     By: /s/
William Clough     Name: William Clough     Title: Executive Chairman          
          PARENT             CUI GLOBAL, INC.                       5/6/2020    
By: /s/ William Clough     Name: William Clough     Title: Executive Chairman  
                  BUYER             VIRTUAL POWER SYSTEMS                      
5/5/2020     By: /s/ Dean Nelson     Name: Dean Nelson     Title: Interim CEO  

 

 

Signature Page to Transition Services Agreement

 

 

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EXHIBIT A

 

MANUFACTURING SERVICES

 

Description of Service:

Seller shall provide manufacturing services to Buyer for all necessary products.
Seller shall use Buyers “owned” inventory as part of any manufacturing. Seller
will manage all aspects of manufacturing coordination.

● Seller agrees to build and deliver to Buyer 130 M2 ICE Blocks and 20 IC Packs
(PO#VPS2018212) on or before the End Date below (collectively, the
“Deliverables”). The Deliverables will be subject to Buyer’s review and
inspection. Buyer shall have the right to reject all or any item of the
Deliverables, in its reasonable discretion for any faulty, damaged, obsolete,
malfunctioning, non-functioning, or otherwise not meeting Buyer’s specifications
for Buyer’s particular use (“Misfunctioning Deliverables”), within 14 days of
receipt of the Deliverables. Upon receipt of notice of rejection of the
Deliverables from Buyer, Seller shall (i) replace such Misfunctioning
Deliverables at its own expense and costs within 7 days or (ii) reduce the Fee
or Other Consideration by the cost of such Misfunctioning Deliverable as set
forth in the bullet point below.

● Seller and Buyer agree that the cost of those units will be $2,750 USD
each/$412,500 USD total.

● Buyer agrees to a one-time tooling NRE charge of $6,200 USD.

● Seller and Buyer agree that these costs will be in exchange for equity as
outlined in Exhibit F.

Service Provider

Seller

 

Service Recipient

Buyer

 

End Date:

September 30, 2020

 

Fee or Other Consideration:

Outlined in Exhibit F.

 

 

Exhibits to Transition Services Agreement

 

 

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EXHIBIT B

 

EMPLOYEE SEPARATION FACILITATION AND FEES

 

Description of Service:

● Buyer agrees that they are responsible for Canadian law requirements of
separation for Buyer’s employees.

● Seller agrees that they will facilitate the layoffs in two stages:

o Stage 1—Dismissal of 3 individuals (designated below in Table B1) on November
1, 2019. Buyer agrees that they are responsible for the legally entitled
separation compensation up to a maximum of $32,900.10 as outlined in Table B1.
Buyer agrees that this reimbursement will be additional equity in Buyer as set
forth in Exhibit F. Seller agrees that they will provide for necessary
separation payments and benefits to those employees.

o Stage 2—Delayed dismissal of 6 individuals (designated below in Table B1) on
or about July 31, 2020. Seller agrees that compensation for those individuals
will be the responsibility of Seller until dismissal. Buyer agrees that at time
of dismissal Buyer will be responsible for legally entitled separation
compensation up to a maximum of $346,365.94 as outlined in Table B1. Buyer
agrees that this reimbursement will be additional equity in Buyer as set forth
in Exhibit F. Seller agrees that they will provide for necessary
separation payments and benefits to those employees.

● Seller acknowledges and agrees that the employee separation fees, costs, and
other expenses equal to an aggregate amount of $379,266.10 (“Costs”) are the
only Costs that Buyer remains liable for and such amounts shall be paid in
equity of Buyer as set forth in Exhibit F. Seller agrees and acknowledges that
Buyer shall have no further liability to Seller or any other third party with
respect to any Costs for the individuals set forth on Table B1 or any other
employees of Seller and any other such separation fees, costs, and other
expenses that are not Costs shall be the full responsibility of Seller.

Service Provider

Seller

 

Service Recipient

Buyer

 

End Date:

November 30, 2020

 

Fee or Other Consideration:

Outlined in Exhibit F

 

 

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TABLE B1

 

 

 [redacted]

 

 

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EXHIBIT C

 

DESIGN SERVICES AND ONGOING CUSTOMER SUPPORT

 

Description of Service:

Buyer understands that Seller still has customers that need to be supported
through final production on or about November 30, 2020.

 

☐   Buyer agrees to provide de minimus engineering services needed to complete
those production runs and will be provided to the Seller until all production is
complete through facility is closure, which shall be on or before the End Date.

 

☐   Buyer agrees to provide any necessary engineering support/services until the
End Date.

 

☐   To the extent that the services provided by Buyer are not covered by this
agreement and are more than de minimus, Seller shall pay the fair market value
for the services to Buyer.

 

 

Service Provider

 

Buyer

 

 

Service Recipient

 

Seller

 

 

End Date:

 

November 30, 2020

 

Fee or Other Consideration:

Buyer agrees to provide these services in exchange for Seller continuing the
employment of required personnel to manufacture and test the ICE products that
will be built before closing of facility, which shall be on or before the End
Date.

 

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EXHIBIT D

 

LEASE, WAREHOUSE, AND SHIPPING SERVICES

 

Description of Service:

●    Seller shall provide all 2nd floor office space for use.

o    Includes all space on 2nd floor

o    To include property taxes, insurance, all utilities, waste services, snow &
lawn care, HVAC, alarm and sprinkler, pest control, and janitorial services.

●    Warehouse space to store finished goods and raw materials. Finished goods
designated space limited, once full Buyer must begin transferring to Buyer’s
own location.

●    Provide all required shipping services, but all shipping charges are the
responsibility of Buyer.

 

 

 

Service Provider

 

Seller

 

 

Service Recipient

 

Buyer

 

 

End Date:

 

November 30, 2020 or the final date that CUI Canada may extend to, whichever is
later, with respect to all of the items set forth in the Description of Service.

 

Fee or Other Consideration:

 

Outlined in Exhibit F

 

 

 

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EXHIBIT E

 

IT, HUMAN RESOURCES, AND INFRASTRUCTURE SERVICES

 

Description of Service:

Seller shall provide the following Services to support IT, Human Resources, and
Infrastructure Services:

 

■    Human resources support; payroll processing, benefits administration, and
consultative support to set up services and ongoing administration.

 

■    Information technology support and licenses to operate within SAP and
Business Objects, as well as off-site data backup.

 

■    Infrastructure services; Internet, Telephone, Security, Server, Storage,
Taxes, Shipping, etc.

 

■    HR, IT, storage, security, janitorial, inventory management, and other
similar services.

 

 

Service Provider

 

Seller

 

 

Service Recipient

 

Buyer

 

 

End Date:

 

November 30, 2020 or the final date that CUI Canada may extend to, whichever is
later, with respect to all of the items set forth in the Description of Service.

 

 

Fee or Other Consideration:

 

Outlined in Exhibit F

 

 

 

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EXHIBIT F

 

SUMMARY OF FEES

 

Equity Exchange Buyer to Seller

 

Total Value

 

Exhibit A

Manufacturing Services

$418,700

USD

 

Exhibit B

Employee Separation Fees

11/1/19

$32,900

USD

 

7/31/20

$346,365

USD

       

Exhibit D

Lease & Warehouse

$172,000

USD

Exhibit E

IT, Human Resources, Infrastructure

$87,750

USD

Exhibit F

CUI approved discount

-($257,715)

USD

 

Total Equity Exchange Due Parent

 

$800,000(1)

USD

 

 

 

(1)

The total outstanding will payable by Buyer pursuant to a convertible promissory
note in the form attached hereto as Exhibit G and issued under that certain
Amended and Restated 2019 Note Purchase Agreement between the Company and the
other parties thereto, dated on or around November 28, 2019, as amended to date.

 

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EXHIBIT G

 

CONVERTIBLE PROMISSORY NOTE

 

1

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THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SUCH ACT.

 

 

CONVERTIBLE PROMISSORY NOTE

 

No. CPN-       Date of Issuance    $800,000.00 May 4, 2020   

 

FOR VALUE RECEIVED, VIRTUAL POWER SYSTEMS, INC., a Delaware corporation (the
“Company”), hereby promises to pay to the order of CUI Global, Inc. (the
“Lender”), the principal sum of Eight Hundred Thousand Dollars ($800,000.00),
together with interest thereon from the date of this Note. Interest shall accrue
at a rate of two and a half percent (2.5%) per annum, compounded annually.

 

This Note is one of a series of Notes issued pursuant to that certain Amended
and Restated 2019 Note Purchase Agreement, among the Company and other lenders
listed on the Schedule of Lenders listed in Exhibit A thereto (the “Purchase
Agreement”), and capitalized terms not defined herein shall have the meaning set
forth in the Purchase Agreement.

 

1.     Payment. All payments shall be made in lawful money of the United States
of America at the principal office of the Company, or at such other place as the
holder hereof may from time to time designate in writing to the Company. Payment
shall be credited first to costs, if any, then to accrued interest due and
payable and any remainder applied to principal. Prepayment of principal, and
payment of interest, may not be made without the consent of the holder of the
Note. The Company hereby waives demand, notice, presentment, protest and notice
of dishonor.

 

2.     Security. This Note is a general unsecured obligation of the Company.

 

3.     Conversion of the Notes. This Note and any amounts due hereunder shall be
convertible into Conversion Shares in accordance with the terms of Section 2.2
of the Purchase Agreement. As promptly as practicable after the conversion of
this Note, the Company at its expense shall issue and deliver to the holder of
this Note, upon surrender of the Note, a certificate or certificates for the
number of full Conversion Shares issuable upon such conversion.

 

4.     Amendments and Waivers; Resolutions of Dispute; Notice. The amendment or
waiver of any term of this Note, the resolution of any controversy or claim
arising out of or relating to this Note and the provision of notice shall be
conducted pursuant to the terms of the Purchase Agreement.

 

5.     Successors and Assigns. This Note applies to, inures to the benefit of,
and binds the successors and assigns of the parties hereto; provided, however,
that the Company may not assign its obligations under this Note without the
written consent of the Majority in Interest of Purchasers. Any transfer of this
Note may be effected only pursuant to the Purchase Agreement and by surrender of
this Note to the Company and reissuance of a new note to the transferee. The
Lender and any subsequent holder of this Note receives this Note subject to the
foregoing terms and conditions, and agrees to comply with the foregoing terms
and conditions for the benefit of the Company and any other Lenders.

 

 

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6.     Officers and Directors not Liable. In no event shall any officer or
director of the Company be liable for any amounts due and payable pursuant to
this Note.

 

7.     No waiver. The Company agrees that any delay on the part of the holder in
exercising any rights hereunder will not operate as a waiver of such rights. The
holder of this Note shall not by any act, delay, omission or otherwise be deemed
to have waived any of its rights or remedies, and no waiver of any kind shall be
valid unless in writing and signed by the party or parties waiving such rights
or remedies.

 

8.     Governing Law. This Note shall be governed by and construed under the
laws of the State of Delaware.

 

9.     Approval. The Company hereby represents that its board of directors, in
the exercise of its fiduciary duty, has approved the Company’s execution of this
Note based upon a reasonable belief that the principal provided hereunder is
appropriate for the Company after reasonable inquiry concerning the Company’s
financing objectives and financial situation. In addition, the Company hereby
represents that it intends to use the principal of this Note primarily for the
operations of its business, and not for any personal, family or household
purpose.

 

[Signature page follows.]

 

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  VIRTUAL POWER SYSTEMS, INC.               5/4/2020     By: /s/ Sanjay Jain    
Name: Sanjay Jain     Title: Chief Financial Officer  

 

 

 

 

[Signature Page to Convertible Promissory Note]