Source: https://ir.idealpower.com/all-sec-filings/content/0001144204-19-026531/tv521127_ex2-1.htm??TB_iframe=true&height=auto&width=auto&preload=false
Timestamp: 2019-08-22 16:19:42
Document Index: 382567191

Matched Legal Cases: ['art 2', 'art 2', 'art 2', 'art 2', 'art 2', 'art 2', 'art 3', 'art 2', 'art 3', 'art 4', 'art 3', 'art 2']

Pathion Holdings, Inc.
This Asset Purchase Agreement is entered into as of April 11, 2019, by and between Ideal Power Inc., a Delaware corporation, (the “Seller”), Pathion Holdings, Inc., a Delaware corporation (the “Purchaser”), and Pathion, Inc., a Delaware corporation (“Subsidiary”). Purchaser and Subsidiary are collectively referred to herein as the “Purchaser Entities”. Certain capitalized terms used in this Agreement are defined in Exhibit A.
1.1 Sale of Transferred Assets. Upon the terms and subject to the conditions set forth in this Agreement, upon the Closing (as defined in Section 1.6), the Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase from the Seller, good and valid title to the Transferred Assets. For purposes of this Agreement, the term “Transferred Assets” shall mean all of the properties, rights, interests and tangible and intangible assets of the Seller relating to the PPSA Business (as defined herein) described below in Sections 1.1(a) – 1.1(j) (wherever located and whether or not required to be reflected on a balance sheet prepared in accordance with GAAP), whether existing as of the date of this Agreement or acquired during the Pre-Closing Period and whether owned by the Seller, which shall not include any Excluded Assets (as defined in Section 1.1(k)):
(a) Patents and Patent Applications: All right, title and interest of the Seller in, to and under the Seller’s patents, patent applications and patent rights in any jurisdiction in the world, identified on Schedule 1.1(a), and any counterparts, reissues, divisions, reexaminations, continuations and continuations-in-part of, and any other patents claiming priority from, any of the foregoing (the patents, patent applications and patent rights referred to in this Section 1.1(a) being referred to in this Agreement as the “Transferred Patents”).
(b) Other Proprietary and IP Assets: All right, title and interest of the Seller in, to and under the trademarks, trade secrets, know-how, inventions, designs, drawings, copyrights, software, bills of material and related supply chain information necessary for the fulfillment of production orders for, and other Intellectual Property and Intellectual Property Rights (other than patent rights) of the Seller relating to the PPSA Business, including works in progress and the trademarks identified on Schedule1.1(b), and all associated goodwill (the Transferred Patents, together with the Intellectual Property and Intellectual Property Rights and goodwill referred to in this Section1.1(b), being referred to in this Agreement as the “Transferred IP”).
(c) Inventory: All of the inventory (including raw materials, work in process, demonstration or evaluation units and finished goods) of the Seller relating to the PPSA Business and identified on Schedule 1.1(c), unless, at least five business days prior to the Closing, the Purchaser notifies the Seller in writing that such inventory is an Excluded Asset (as defined below at the end of this Section 1.1) (the inventory referred to in this Section 1.1(c) being referred to in this Agreement as the “Transferred Inventory”).
(d) Equipment: All equipment of the Seller relating to the PPSA Business (including test equipment) and identified on Schedule 1.1(d), unless, at least five business days prior to the Closing, the Purchaser notifies the Seller in writing that such other equipment are Excluded Assets (the equipment referred to in this Section 1.1(d), other than any equipment that the Purchaser determines are Excluded Assets, being referred to in this Agreement as the “Transferred Equipment”).
(e) Other Fixed Assets: All furniture, fixtures, computer equipment and other tangible assets of the Seller relating to the PPSA Business and identified on Schedule 1.1(e), unless, at least five business days prior to the Closing, the Purchaser notifies the Seller in writing that such other tangible assets are Excluded Assets (the tangible assets referred to in this Section 1.1(e), other than any tangible assets that the Purchaser determines are Excluded Assets, being referred to in this Agreement as the “Transferred Fixed Assets”).
(f) Contract Rights: (i) All rights of the Seller under all Seller Contracts relating to the PPSA Business and identified on Schedule 1.1(f).
(h) Claims: All Claims (including Claims for past infringement of Transferred IP) of the Seller against other Persons to the extent relating to the Transferred Assets (regardless of whether or not such Claims have been asserted by the Seller), and all rights of indemnity, warranty rights, rights of contribution, rights to refunds, rights of reimbursement and other rights of recovery possessed by the Seller against other Persons to the extent relating to the Transferred Assets (regardless of whether such rights are currently exercisable).
(i) Promotional Materials, Records, Etc.: All advertising and promotional materials, and all books (including log books), records and files, of the Seller relating to the Transferred Assets and identified on Schedule 1.1(i) (the books, records and other items referred to in this Section 1.1(i) being referred to in this Agreement as the “Transferred Books”).
(j) Accounts Receivable: All accounts receivable of the Seller relating to the PPSA Business and identified on Schedule 1.1(j), regardless of whether or not such accounts receivable would be required to be included on the Seller’s financial statements in accordance with GAAP.
(k) Excluded Assets. Notwithstanding the foregoing, the parties agree that the Seller is not selling, assigning, transferring, conveying or delivering to the Purchaser or a Purchaser Affiliate, and the Transferred Assets shall not include, the assets of the Seller identified on Schedule 1.1(z), any inventory disposed of in the ordinary course of business and in a manner that does not contravene Section 4.2, or any asset of the Seller not relating to the PPSA Business or not specifically identified in Sections 1.1(a) – 1.1(j) above (collectively, the “Excluded Assets”).
(b) Physical Delivery. The following provisions shall apply with respect to the physical delivery of the Transferred Inventory, Transferred Equipment, Transferred Fixed Assets and Transferred Books to the Purchaser (the “Tangible Transferred Assets”):
(i) any and all Tangible Transferred Assets that are located in any facility identified in Schedule 1.2(b)(i) shall remain at such location; and
(ii) if any Tangible Transferred Assets are located somewhere other than the facility identified in Schedule 1.2(b)(i), then the Seller shall cause such Tangible Transferred Assets to be delivered to such facility within ten days following the Closing.
(a) The Purchaser will pay $1,400,000 (one million four hundred thousand dollars) to the Seller (the “Purchase Price”), as follows:
(i) $500,000 (five hundred thousand dollars) shall be payable in immediately available funds by check or wire transfer at the Closing to Seller as set forth in Schedule 1.3(a)(i) hereto; and
(ii) $900,000 (nine hundred thousand dollars) shall be payable to the Seller by the issuance of 150,000 (one hundred fifty thousand) shares of the common stock of Pathion Holdings, Inc. (the “Shares”).
(b) At the Closing, the Purchaser shall assume the Assumed Liabilities (as defined in Section 1.4(b).
(a) Except as set forth in Section 1.4(b) and/or listed on Schedule 1.4(b), the Purchaser shall not assume any Liabilities of the Seller (whether or not related to the Transferred Assets), including: (i) Tax Liabilities of the Seller; (ii) any Liabilities of the Seller relating to indebtedness, legal services, accounting services, financial advisory services, investment banking services or other professional services performed in connection with the Transactions; or (iii) any wages or salaries or other Liabilities relating to any Seller Employee, including any Retained Employment Liabilities (as defined in Section 8.1).
(b) Assumed Liabilities: “Assumed Liabilities” shall include all liabilities relating to the PPSA Business or the Transferred Assets, including, but not be limited to: Accounts payable, accrued expenses, open purchase orders, and any warranty liability of the Seller identified and described on Schedule 1.4(b) of the Seller existing on the Closing Date, regardless of whether or not such liabilities would be required to be included on the Seller’s financial statements in accordance with GAAP.
2. Representations and Warranties of the Seller .
Subject to the exceptions set forth in the Seller Disclosure Schedule prepared in accordance with Section 9.15, the Seller represents and warrants, to and for the benefit of the Purchaser Entities, as follows:
(a) Part 2.4(a) of the Seller Disclosure Schedule provides an accurate and complete breakdown as of the date of this Agreement of all inventory relating to the PPSA Business and included in the Transferred Assets (including raw materials, work in process, demonstration or evaluation units and finished goods) owned by the Seller and the location of such inventory.
(b) The Seller has delivered to the Purchaser a complete and accurate copy of each standard form of Seller IP Contract used by the Seller at any time since January 1, 2017, including each standard form of customer license agreement for any Seller Product. The Seller has delivered each standard form of the following Seller Contracts used by Seller at any time since January 1, 2017: (i) employee agreement containing any assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality provision; and (ii) consulting or independent contractor agreement containing any assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality provision.
(vii) except for the nonexclusive licenses and rights granted (1) in Contracts identified or referred to in Part 2.5(a)(iv) of the Seller Disclosure Schedule or (2) to end user customers of Seller Products pursuant to an agreement that does not deviate in any material respect from the Seller's standard form thereof, the Seller is not bound by, and no Transferred Seller IP is subject to, any Contract containing any covenant or other provision that in any way limits or restricts the ability of the Seller to exploit, assert, or enforce any Transferred Seller IP anywhere in the world; and
(viii) to Seller’s Knowledge, the Seller owns or otherwise has, and after the Closing the Purchaser will have, all Intellectual Property Rights needed to conduct the PPSA Business.
(e) Neither the execution, delivery or performance of this Agreement nor the consummation of any of the Transactions or any such other agreement will, with or without notice or the lapse of time, result in or give any other Person the right or option to cause or declare: (i) a loss of, or Encumbrance on, any Transferred Seller IP; (ii) a breach of any Contract listed or required to be listed in Part 2.5(a)(iii) or Part 2.5(a)(iv) of the Seller Disclosure Schedule; (iii) the release, disclosure or delivery of any Transferred Seller IP by or to any escrow agent or other Person; or (iv) the grant, assignment or transfer to any other Person (other than the Purchaser Entities) of, or entitle any other Person (other than the Purchaser Entities) to exercise or use, any license or other right or interest under, to or in any of the Transferred Seller IP.
(g) To its Knowledge, neither the Seller (nor any of its Predecessors) has ever infringed (directly, contributorily, by inducement or otherwise), misappropriated or otherwise violated or made unlawful use of any Intellectual Property Right of any other Person in the conduct of the PPSA Business. Without limiting the generality of the foregoing, to the Seller’s Knowledge:
(iii) the Seller (and none of its Predecessors) has not received any written notice relating to any actual, alleged or suspected infringement, misappropriation or violation by Seller in the conduct of the PPSA Business of any Intellectual Property Right of another Person; and
2.7 Compliance with Legal Requirements. To the Knowledge of the Seller, the Seller is, (and each of its Predecessors) at all times has been, in compliance in all material respects with each Legal Requirement that is applicable to it for the conduct of the PPSA Business or the ownership of the Transferred Assets. Except as set forth in Part 2.7 of the Seller Disclosure Schedule, the Seller has not (nor has any of its Predecessors) received in the last five (5) years any notice or other communication from any Person regarding any actual or possible violation of, or failure to comply with, any Legal Requirement, in each case in connection with the conduct or operation of the PPSA Business.
2.12 Authority; Binding Nature of Agreement; Inapplicability of Anti-takeover Statutes.
(a) The Seller has the absolute and unrestricted right, power and authority to enter into and to perform its obligations under this Agreement and under each other agreement, document or instrument referred to in or contemplated by this Agreement to which the Seller is or will be a party; and, the execution, delivery and performance by the Seller of this Agreement and of each such other agreement, document and instrument have been duly authorized by all necessary action on the part of the Seller and its board of directors. This Agreement and each other agreement, document and instrument referred to in or contemplated by this Agreement to which the Seller is a party constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.
(b) The Seller’s board of directors has: (i) unanimously determined that the Transactions are advisable and fair and in the best interests of the Seller and its stockholders; and (ii) to the extent necessary, adopted a resolution having the effect of causing the Seller not to be subject to any state takeover law or similar Legal Requirement that might otherwise apply to the Transactions.
2.14 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other similar fee or commission in connection with any of the Transactions based upon arrangements made by or on behalf of any of the Seller.
3. Representations and Warranties of the Purchaser Entities.
Subject to the exceptions set forth in the Purchaser Disclosure Schedule prepared in accordance with Section 9.15, the Purchaser and the Subsidiary, jointly and severally, represent and warrant to, and for the benefit of the Seller as follows:
(a) Each of the Purchaser and the Subsidiary is a corporation, validly existing and in good standing (or equivalent status) under the laws of Delaware and each has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as now being conducted and as presently proposed to be conducted. Each Purchaser Entity is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect on such Purchaser Entity.
(b) Each of the Purchaser and the Subsidiary have delivered to the Seller accurate and complete copies of (i) its Charter Documents; and (ii) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of its stockholders or members, its board of directors (or other similar body) and all committees of its board of directors (or other similar body), as applicable, since its date of incorporation, which minutes or other records contain a complete summary of all meetings of directors, stockholders and members, and all actions taken thereat or by written consent, since its incorporation.
(a) As of the date of this Agreement, the entire authorized capitalization of Purchaser consists of 300,000,000 shares of common stock, 19,680,587 of which have been duly authorized, are validly issued, fully paid and nonassessable and were issued in accordance with the with the registration or qualification provisions of the Securities Act of 1933, as amended (the “Act”), and any relevant state securities laws, or pursuant to valid exemptions therefrom, and the applicable Purchaser Charter Documents, and are not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, registration right, subscription right, or any similar right under any provision of the laws of the State of Delaware or any contract to which Purchaser is a party or otherwise bound.
(b) As of the date of this Agreement, the entire authorized capitalization of Subsidiary consists of 100,000,000 shares of common stock, 19,480,587 of which have been duly authorized, are validly issued, fully paid and nonassessable and were issued in accordance with the with the registration or qualification provisions of the Act, and any relevant state securities laws, or pursuant to valid exemptions therefrom, and the applicable Subsidiary Charter Documents, and are not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, registration right, subscription right, or any similar right under any provision of the laws of the State of Delaware or any contract to which Subsidiary is a party or otherwise bound.
3.3 Subsidiaries. Except for the Subsidiary, no Purchaser Entity currently owns or controls, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. No Purchaser Entity is a participant in any joint venture, partnership or similar arrangement.
3.4 Non-Contravention; Consents. Neither: (a) the execution, delivery or performance of this Agreement or any of the other Transactional Agreements; nor (b) the consummation of the Transactions, will (with or without notice or lapse of time) contravene, conflict with or result in a violation of: (i) any of the provisions of either Purchaser Entity’s Charter Documents; (ii) any resolution adopted by the stockholders, the board of directors (or similar body) or any committee of the board of directors (or similar body) of either Purchaser Entity; or (iii) any provision of any material contract to which either Purchaser Entity is bound, except in the case of clauses “(i),” “(ii)” and “(iii)” as would not have a Material Adverse Effect on such Purchaser Entity’s ability to consummate the Transactions or to perform its obligations under this Agreement. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Body is required on the part of either Purchaser Entity in connection with the consummation of the Transactions, including the issuance of the Shares.
3.5 Authority; Binding Nature of Agreement. Each Purchaser Entity has all necessary corporate power and authority to enter into and perform its obligations under this Agreement and under each other agreement, document and instrument referred to in this Agreement to which it is a party, and to consummate the transactions contemplated hereby and thereby; and the execution, delivery and performance by each Purchaser Entity of this Agreement any of each such other agreement, document and instrument and the consummation by the Purchaser Entities of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of each Purchaser Entity and no other actions on the part of either Purchaser Entity is necessary to authorize this Agreement any of each such other agreement, document and instrument and the consummation by the Purchaser Entities of the transactions contemplated hereby and thereby. This Agreement and each other agreement, document or instrument referred to in this Agreement to which either Purchaser Entity is a party constitutes the legal, valid and binding obligation of such Purchaser Entity enforceable against it in accordance with its terms, subject to: (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.
3.6 Valid Issuance of Shares. The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and non-assessable and free of restrictions on transfer other than restrictions on transfer, applicable state and federal securities laws and liens or encumbrances created by or imposed by Seller. The Shares will be issued in compliance with all applicable federal and state securities laws. As of April 11, 2019, Pathion Holdings, Inc. has sold 200,000 shares of its common stock at $6/share.
3.7 Proceedings; Orders. There is no pending Proceeding and, to the Knowledge of the Purchaser and the Subsidiary, no Person has threatened to commence any Proceeding: (i) that involves either Purchaser Entity or any officer, director or any executive-level employee of either Purchaser Entity; (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Transactions, or (iii) that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. To the Knowledge of the Purchaser and the Subsidiary, no event has occurred, and no claim, dispute or other condition or circumstance exists, that will or could reasonably be expected to, give rise to or serve as a basis for the commencement of any such Proceeding.
3.8 Full Disclosure. To the Knowledge of the Purchaser and the Subsidiary, this Agreement does not: (i) contain any representation, warranty or information that is false or misleading with respect to any material fact; or (ii) omit to state any material fact necessary in order to make the representations, warranties and information contained and to be contained herein and therein (in the light of the circumstances under which such representations, warranties and information were or will be made or provided) not false or misleading.
4.1 Access and Investigation. During the Pre-Closing Period, the each party shall, and shall cause its Representatives to: (a) provide the other party’s Representatives with reasonable access during normal business hours to the such party’s Representatives, personnel and assets and to all existing books, records, Tax Returns, work papers and other documents and information relating to the Purchaser, or in the case of the Seller, relating to the PPSA Business and the Transferred Assets; and (b) provide the other party and its Representatives with copies of such existing books, records, Tax Returns, work papers and other documents and information relating to the Purchaser, or in the case of the Seller relating to the PPSA Business and the Transferred Assets, and with such additional financial, operating and other data and information regarding the Purchaser, or in the case of the Seller, relating to the PPSA Business or the Transferred Assets, as the other party may reasonably request. During the Pre-Closing Period, a party may make inquiries of Persons having business relationships with the other party (including suppliers, licensors, distributors and customers) only with the other party’s prior written consent (which consent shall not be unreasonably withheld or delayed).
4.2 Operation of Business. During the Pre-Closing Period, each party shall ensure that:
(a) it does not: (i) enter into, or in the case of Seller, permit any of the Transferred Assets owned or used by it to become bound by, any Contract that is or would constitute a Contract required to be identified in Part 2.6(a) of the Seller Disclosure Schedule or Part 3.9 of the Purchaser Disclosure Schedule, as applicable, if entered into prior to the date of this Agreement; or (ii) amend or prematurely terminate, or waive any material right or remedy under, any Contract required to be identified in Part 2.6(a) of the Seller Disclosure Schedule or Part 3.9 of the Purchaser Disclosure Schedule, as applicable;
(b) it does not: (i) acquire, lease or license any right or other asset used in the PPSA Business or the Business of the Purchaser Entities from any other Person for an aggregate value in excess of $5,000; (ii) sell or otherwise dispose of, or lease, license or encumber, any Seller Products or any other right or asset used in the PPSA Business or the Business of the Purchaser Entities to any other Person; or (iii) waive or relinquish any right, except in the ordinary course of business consistent with past practices;
Notwithstanding the foregoing, each party may take any action described in: (i) clauses “(a)” through “(c)” above if: (A) the other party gives its prior written consent to the taking of such action by such party; or (B) such action is expressly contemplated by this Agreement; and (ii) Part 4.2 of the Seller Disclosure Schedule or the Purchaser Disclosure Schedule, as applicable, after consultation with the other party.
4.3 Filings and Consents. The Seller and the Purchaser Entities shall use commercially reasonable efforts to take, or cause to be taken, all actions necessary to consummate and make effective the Transactions as promptly as practicable after the date of this Agreement. Without limiting the generality of the foregoing, each party to this Agreement: (i) shall make all filings (if any) and give all notices (if any) required to be made and given by such party in connection with the Transactions; (ii) shall use commercially reasonable efforts to obtain each Consent (if any) required to be obtained (pursuant to any applicable Legal Requirement or Contract, or otherwise) by such party in connection with the Transactions; and (iii) shall use commercially reasonable efforts to lift any restraint, injunction or other legal bar to the Transactions. Notwithstanding the foregoing, Seller’s obligation to make any filing or give any notice under the Transactional Agreements or in connection with the Transactions shall be subject to Seller’s compliance with its obligations as a publicly traded company and the rules or regulations of any securities exchange on which the securities of Seller are listed or traded.
(a) During the Pre-Closing Period, the Seller and the Purchaser Entities shall promptly notify the other party in writing of: (i) the discovery by the Seller or the Purchaser Entities, as applicable, of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes a material breach of or an inaccuracy in any representation or warranty made by the Seller or the Purchaser Entities, as applicable, in this Agreement; (ii) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement and that would cause or constitute a material breach of or an inaccuracy in any representation or warranty made by the Seller or the Purchaser Entities, as applicable, in this Agreement if: (A) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance; or (B) such event, condition, fact or circumstance had occurred, arisen or existed on or prior to the date of this Agreement; (iii) any material breach of any covenant or obligation of the Seller or the Purchaser Entities, as applicable; and (iv) any event, condition, fact or circumstance that would make the timely satisfaction of any of the conditions set forth in Section 5 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to be disclosed pursuant to Section 4.4(a) requires any change in the Seller Disclosure Schedule or the Purchaser Disclosure Schedule, as applicable, or if any such event, condition, fact or circumstance would require such a change assuming the Seller Disclosure Schedule or the Purchaser Disclosure Schedule, as applicable, were dated as of the date of the occurrence, existence or discovery of such event, condition, fact or circumstance, then prior to the fifth business day prior to the Closing Date, the Seller or the Purchaser Entities, as applicable, shall promptly deliver to the other party an update to the Seller Disclosure Schedule or the Purchaser Disclosure Schedule, as applicable, specifying such change. No such update shall be deemed to supplement or amend the Seller Disclosure Schedule or the Purchaser Disclosure Schedule, as applicable, for the purpose of: (i) determining the accuracy of any of the representations and warranties made by the Seller or the Purchaser Entities, as applicable, in this Agreement; or (ii) determining whether any of the conditions set forth in Section 5 has been satisfied.
4.5 Consent of Stockholders. As promptly as practicable after the execution and delivery of this Agreement, the Purchaser Entities shall, in accordance with their respective Charter Documents and applicable Legal Requirements, provide to their respective stockholders appropriate documents (if any) in connection with the obtaining of any necessary written consents of the stockholders of the Purchaser Entities authorizing the Transactions and waiving any advance notice provision applicable to any of the Transactions. Notwithstanding anything to the contrary contained in this Agreement, any materials submitted to each Purchaser Entities’ stockholders in connection with the Transactions, if any, shall be subject to prior review and approval by the Seller (which approval shall not be unreasonably withheld).
4.6 Efforts. During the Pre-Closing Period, the Seller and the Purchaser Entities shall use commercially reasonable efforts to cause the conditions set forth in Section 5 to be satisfied on a timely basis.
4.7 Update to Outstanding Liabilities. At least two business days (and no more than five business days) prior to the Closing, the Seller shall deliver to the Purchaser an update of Schedule 1.4(b) and the Purchaser entities shall deliver to the Seller and updated to Part 3.11 of the Purchaser Disclosure Schedule, in each case identifying each of the creditors of the Seller or the Purchaser Entities, as applicable, including lenders, trade creditors, employees and professional advisors, and the outstanding amount owed by the Seller or the Purchaser Entities, as applicable, to such creditor, as of the date on which such update is delivered and estimated to be owed as of the Closing.
4.8 Notice to Certain Persons and Cooperation. The parties: (a) no later than the third business day following the date of this Agreement, shall provide all Persons entitled to notice of any of the Transactions prior to the closing of the Transactions with written notice of such Transactions; and (b) upon the request of the other party, shall use its reasonable efforts to obtain waivers (in a form reasonably satisfactory to the other party) executed by all Persons described in clause “(a)” of this sentence of the notice requirements described in clause “(a)” of this sentence (it being understood that waivers shall not be required from any Person with respect to whom such notice period has been complied with). The Seller will use its reasonable efforts to transfer (and cooperate with the Purchaser in any manner reasonably requested by the Purchaser to transfer) all current customer orders of the Seller to the Purchaser in a non-disruptive fashion, and advise such customers to begin doing business with the Purchaser following the Closing with regard to all Transferred Products or otherwise. Notwithstanding the foregoing, Seller’s obligations under this Section 4.8 shall be subject to Seller’s compliance with its obligations as a publicly traded company and the rules or regulations of any securities exchange on which the securities of Seller are listed or traded
4.9 B-Tran Option. Upon the terms and subject to the conditions contained in this Agreement, the Seller shall provide a three (3) year exclusive option to Purchaser to purchaser the Seller’s “B-Tran” chips, which option period shall commence upon commercial production of the same (the “B-Tran Option”). Subject to Purchaser Entities meeting the Minimum Purchase Obligations (as defined below), during the B-Tran Option period, Seller shall not sell B-Tran chips to third parties for use in commercial, industrial, microgrid, and grid-scale standalone energy storage systems using an integrated multi-port power conversion system. The exclusivity granted hereunder shall terminate in the event that the Purchaser Entities do not purchase B-Tran chips having an aggregate purchase price of $500,000 or more in the first year of the B-Tran Option, and B-Tran chips having an aggregate purchase price of $750,000 or more in the second year of the B-Tran Option (the “Minimum Purchase Obligations”).
5.1 Conditions to Obligations of Purchaser Entities. The Purchaser Entities’ obligations to purchase the Transferred Assets and to take the other actions required to be taken by the Purchaser Entities at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by the Purchaser Entities, in whole or in part, in writing):
(c) No Material Adverse Effect. Between the date of this Agreement and the Closing Date, no event shall have occurred or circumstance shall exist that has had (or would be reasonably expected to have) a Material Adverse Effect on the Seller or the PPSA Business.
(d) Release of Liens. The Purchaser shall have received evidence satisfactory to it of the release by any Person who held a security interest in the Transferred Assets of all Encumbrances on the Transferred Assets, except as set forth in Part 2.3 of the Seller Disclosure Schedule, and there shall not be any other Encumbrance on any of the Transferred Assets (other than any liens for sales Taxes that are imposed by law and that are not in excess of $1,000 in the aggregate).
(e) Agreements and Documents. The Purchaser Entities shall have received the following agreements and documents:
(iv) a certified copy of resolutions of the Seller’s board of directors pursuant to which the board of directors indicates its good faith belief that the purchase price being paid to the Seller under this Agreement constitutes fair value for the Transferred Assets; and
(f) No Restraints. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of any of the Transactions shall have been issued by any court of competent jurisdiction and remain in effect, and there shall not be any Legal Requirement enacted or deemed applicable to any of the Transactions that makes consummation of the Transactions illegal.
(a) Accuracy of Representations, Warranties and Covenants. Except as disclosed in the Purchaser Disclosure Schedule, (i) each of the representations and warranties made by the Purchaser Entities in this Agreement shall have been accurate in all material respects as of the date of this Agreement, (ii) each of the representations and warranties made by the Purchaser Entities in this Agreement shall be accurate in all material respects as of the Closing Date as if made on and as of the Closing Date (except for such representations and warranties which address matters only as of a particular time, which shall have been accurate in all material respects as of such particular time), and (iii) all of the covenants and obligations that the Purchaser Entities are required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.
(i) the Assumption Agreement, duly executed by the Purchaser; and
(ii) a Sublease Agreement in the form of Exhibit C (the “Sublease Agreement”), duly executed by the Purchaser and the Landlord (as defined in the Sublease Agreement).
(b) unless otherwise terminated pursuant to this Section 6.1, by either party, with a $200,000 “break-up” fee payable to the other party;
(c) by either the Purchaser or the Seller if: (i) a court of competent jurisdiction or other Governmental Body shall have issued a final and non-appealable order, decree or ruling, or shall have taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Transactions; or (ii) there shall be any Legal Requirement enacted, promulgated, issued or deemed applicable to any of the Transactions by any Governmental Body that would make consummation of any of the Transactions illegal;
(d) by the Purchaser if: (i) any of the representations and warranties of the Seller contained in this Agreement shall be materially inaccurate as of the date of this Agreement, or shall have become materially inaccurate as of a date subsequent to the date of this Agreement, such that the condition set forth in Section 5.1(a) would not be satisfied; or (ii) any of the covenants of the Seller contained in this Agreement shall have been materially breached such that the condition set forth in Section 5.1(a) would not be satisfied; provided, however, that if an inaccuracy in any of the representations and warranties of the Seller as of a date subsequent to the date of this Agreement or a breach of a covenant by the Seller is curable by the Seller through the use of reasonable efforts within 30 days after the Purchaser notifies the Seller in writing of the existence of such inaccuracy or breach (the “Seller Cure Period”), then the Purchaser may not terminate this Agreement under this Section 6.1(d) as a result of such inaccuracy or breach prior to the expiration of the Seller Cure Period, provided the Seller, during the Seller Cure Period, continues to exercise reasonable efforts to cure such inaccuracy or breach (it being understood that the Purchaser may not terminate this Agreement pursuant to this Section 6.1(d) with respect to such inaccuracy or breach if such inaccuracy or breach is cured prior to the expiration of the Seller Cure Period);
(e) by the Seller if: (i) any of the Purchaser’s representations and warranties contained in this Agreement shall be materially inaccurate as of the date of this Agreement, or shall have become materially inaccurate as of a date subsequent to the date of this Agreement, such that the condition set forth in Section 5.2(a) would not be satisfied; or (ii) if any of the Purchaser’s covenants contained in this Agreement shall have been materially breached such that the condition set forth in Section 5.2(a) would not be satisfied; provided, however, that if an inaccuracy in any of the Purchaser’s representations and warranties as of a date subsequent to the date of this Agreement or a breach of a covenant by the Purchaser is curable by the Purchaser through the use of reasonable efforts within 30 days after the Seller notifies the Purchaser in writing of the existence of such inaccuracy or breach (the “Purchaser Cure Period”), then the Seller may not terminate this Agreement under this Section 6.1(e) as a result of such inaccuracy or breach prior to the expiration of the Purchaser Cure Period, provided the Purchaser, during the Purchaser Cure Period, continues to exercise reasonable efforts to cure such inaccuracy or breach (it being understood that the Seller may not terminate this Agreement pursuant to this Section 6.1(e) with respect to such inaccuracy or breach if such inaccuracy or breach is cured prior to the expiration of the Purchaser Cure Period); or
6.2 Termination Procedures. If the Purchaser wishes to terminate this Agreement pursuant to Section 6.1, the Purchaser shall deliver to the Seller a written notice stating that the Purchaser is terminating this Agreement and setting forth a brief description of the basis on which the Purchaser is terminating this Agreement. If the Seller wishes to terminate this Agreement pursuant to Section 6.1, the Seller shall deliver to the Purchaser a written notice stating that the Seller is terminating this Agreement and setting forth a brief description of the basis on which the Seller is terminating this Agreement.
6.3 Effect of Termination. If this Agreement is terminated pursuant to Section 6.1, all further liability or obligations of the parties under this Agreement shall terminate (other than the $200,000 “break-up” fee in the case of a termination pursuant to Section 6.1(b)); provided, however, that: (a) neither the Seller nor the Purchaser Entities shall be relieved of any obligation or liability arising from any prior breach by such party of any provision of this Agreement; and (b) the parties shall, in all events, remain bound by and continue to be subject to the provisions set forth in this Section 6.3 and Section 9.
7.1 Survival of Representations, Etc. The representations and warranties made by the Seller in this Agreement (including the representations and warranties set forth in the Seller Closing Certificate) shall survive the Closing until 11:59 p.m. Texas time on the date that is twelve (12) months following the Closing Date (the “Representation Survival Time”) and shall thereafter terminate; provided, however, that if, at any time prior to the Representation Survival Time, a party delivers to the other party a written notice asserting a claim for a breach of such representations and warranties, then the claim asserted in such notice shall survive the Representation Survival Time until such time as such claim is fully and finally resolved.
7.2 Indemnification by the Seller. From and after the Closing and through the Indemnification Survival Time (as defined below) (but subject to Section 7.3), the Seller shall hold harmless and indemnify each of the Indemnitees from and against, and shall compensate and reimburse each of the Indemnitees for, any Damages which are suffered or incurred by any of the Indemnitees or to which any of the Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party claim) to the extent such Damages directly or indirectly arise from or as a result of, or are directly or indirectly connected with (i) any claims of infringement with regard to Transferred IP or the Transferred Patents (this indemnification includes, but is not limited to, claims by Princeton Power and NextEnergy), or (ii) the aggregate amount of Assumed Liabilities as of the Closing exceeding $1,000,000.
(a) Seller shall not be required to make any indemnification payment pursuant to Section 7.2 until such time as the total amount of all Damages that have been suffered or incurred by any one or more of the Indemnitees, or to which any one or more of the Indemnitees has or have otherwise become subject, exceeds $10,000 in the aggregate. If the total amount of such Damages exceeds $10,000 in the aggregate, then the Indemnitees shall be entitled to be indemnified against and compensated and reimbursed for the entire amount of such Damages, and not merely the portion of such Damages exceeding $10,000; provided, however, that: (i) neither Seller nor Purchaser Entities shall be liable to the other party under this Agreement for any lost profits, diminution of value, special, exemplary, punitive, incidental or consequential damages, or damages calculated as a multiple of company revenue, profits or similar metrics; (ii) Seller shall not be liable to Purchaser Entities or to any other party under Section 7.2(i) for any damages, losses, or liabilities of any kind following the expiration of the statute of limitations for any such infringement claims (the “Indemnification Survival Time”), provided, however, that if at any time prior to the Indemnification Survival Time the Purchaser (acting in good faith) delivers to the Seller a written notice asserting an Indemnification Claim under Section 7.2(i) properly asserted in accordance with this Agreement (on behalf of itself or any other Indemnitees), then the claim asserted in such notice shall survive the Indemnification Survival Time until such time as such claim is fully and finally resolved; and (iii) Seller shall not be liable to the Purchaser Entities or to any other party under this Agreement, whether pursuant to Section 7.2(ii) or otherwise, for any damages, losses, or liabilities of any kind related to any Assumed Liabilities on or after the date that is six (6) months following the Closing Date.
(b) The limitations set forth in Section 7.3(a) shall not apply in the case of intentional misrepresentation, willful misconduct or fraud.
7.4 Indemnification Procedure; Defense of Third Party Claims.
(a) Whenever any Damages shall be asserted against or incurred by any Indemnitee, such Indemnitee (or, if not a party, the party that is related to such Indemnitee) (the “Indemnified Party”), shall give written notice thereof (an “Indemnification Claim”) to Seller. The Indemnified Party shall furnish to the Seller in reasonable detail such information as the Indemnified Party may have with respect to the Indemnification Claim (including in any case copies of any summons, complaint or other pleading that may have been served on it and any written claim, demand, invoice, billing or other document evidencing or asserting the same). The failure to give such notice shall not relieve the Indemnifying Party of any of its indemnification obligations under this Agreement unless (and then only to the extent that) such failure materially and adversely affects the ability of the Indemnifying Party to defend against the Indemnification Claim.
(b) If the Indemnification Claim is based on a claim of a Person that is not a party to this Agreement, Seller shall be entitled, but not obligated, to undertake the defense of such Indemnification Claim, with counsel of its own choice (such counsel being subject to written approval by the Indemnified Party, which approval shall not be unreasonably withheld or delayed), with Seller having the right to control the defense and settlement of such Indemnification Claim; provided, however, that (i) Seller shall use commercially reasonable efforts in its defense of any such Indemnification Claim; (ii) each Indemnified Party shall have the right to participate in the defense of such matter with counsel of its own choice, but not to determine or conduct any negotiation of settlement, adjustment or compromise with respect to any such Indemnification Claim, and the fees and expenses of such counsel shall be at the expense of the Indemnified Party; and (ii) the Indemnified Party shall approve in writing (such approval not to be unreasonably withheld or delayed) any settlement or compromise, or any consent to the entry of any judgment with respect to the Indemnification Claim. To the extent requested by Seller, each Indemnified Party agrees to reasonably cooperate with Seller and its counsel in connection with the Indemnification Claim, provided that Seller shall reimburse the Indemnified Party for any direct out-of-pocket expenses associated with the same. Each Indemnified Party and Seller Party shall use reasonable efforts to keep the other party informed at all times as to the status of its efforts with respect to any Indemnification Claim covered hereby and to consult with the other party concerning its efforts. In the event that Seller does not undertake the defense of any Indemnification Claim, (i) each Indemnified Party shall have the right to participate in the defense of such matter with counsel of its own choice and the fees and expenses of such counsel shall be at the expense of such Indemnified Party and (ii) Indemnifying Party shall have the right to approve in writing (such approval not to be unreasonably withheld or delayed) any settlement or compromise, or any consent to the entry of any judgment with respect to the Indemnification Claim.
8.2 401(k) Plan. Effective as of the Closing Date, the Seller shall permit each Proposed Employee who timely accepts an offer of employment extended to such individual by Purchaser or a Purchaser Affiliate in connection with the Transactions (each a “Hired Employee”) to: (a) elect a distribution of his or her account balance in the Seller 401(k) Plan, pursuant to the provisions thereof; or (b) elect to retain his/her account balance in the Seller 401(k) Plan.
8.3 Workers Compensation. Responsibility for workers compensation Claims of Seller Employees arising out of conditions having a date of injury (or, in the case of a Claim relating to occupational illness or disease, the last significant exposure) prior to or on the Closing Date shall remain with the Seller. The Purchaser shall have responsibility for workers compensation Claims of Hired Employees arising out of conditions having a date of injury (or, in the case of a claim relating to occupational illness or disease, the last significant exposure) after the Closing Date.
8.4 Prior Contracts. As of the Closing, the Seller shall terminate, waive and release its rights under any covenants regarding noncompetition, non-solicitation, conflicting obligations and other similar rights under any Contracts with the Hired Employees and Hired Consultants solely to the extent necessary to allow the Purchaser Entities to operate the PPSA Business post-Closing.
8.5 Communications. The Seller shall not (and the Seller shall not permit any of its Representatives to) communicate with Seller Employees regarding post-Closing employment matters with the Purchaser or any Purchaser Affiliate, including post-Closing employee benefit plans and compensation, without the prior written approval of the Purchaser.
9.3 Publicity. The Seller and the Purchaser Entities shall ensure that, on and at all times during the Pre-Closing Period and after the Closing Date: (a) no press release, public statement or other publicity concerning any of the Transactions is issued or otherwise disseminated by or on behalf of the other party or any of the Representatives of the other party without the other party’s prior written consent; (b) the Seller and the Seller's Representatives or the Purchaser Entities and the Purchaser Entities’ Representatives, as applicable, continue to keep the terms of this Agreement and the other Transactional Agreements strictly confidential; provided, however, that the existence and terms of this Agreement and the other Transactional Agreements may be disclosed to the extent required by law, provided that before making such a disclosure the disclosing party first notifies the other party and gives the other party an opportunity to limit such disclosure or seek a protective order and the disclosing party cooperates with the other party as reasonably requested; and (c) the Seller and the Representatives of the Seller or the Purchaser Entities and the Purchaser Entities’ Representatives, as applicable, keep strictly confidential, and do not use or disclose to any other Person, any non-public document or other information that relates to the Agreement, the Transactions or Transferred Assets. During the Pre-Closing Period, except as expressly contemplated by this Agreement, each party will use all reasonable efforts to consult with the other party prior to issuing any press release or making any public statement regarding this Agreement or the Transactions, subject in all cases to Seller’s compliance with its obligations as a publicly traded company and the rules or regulations of any securities exchange on which the securities of Seller are listed or traded.
If to any Purchaser Entity:
16450 Los Gatos Boulevard, Suite 207
Attention: Glen Haubl
with a copy delivered by email to gjones@pathion.com and wglausi@grsm.com
(b) Neither the Seller nor the Purchaser Entities shall be permitted to assign any of its rights or delegate any of its obligations under this Agreement without the other party’s prior written consent.
9.12 Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Purchaser Entities and the Seller.
9.14 Entire Agreement. The Transactional Agreements set forth the entire understanding of the parties relating to the subject matter thereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter thereof, including, without limitation that certain Term Sheet for Acquisition of Ideal Power PPSA Assets entered into by the Purchaser and the Seller on or about February 17, 2019.
Pathion, Inc.,
By: /s/ Michael Liddle
Pathion Holdings, Inc.,
Exhibit A - Certain Definitions
Exhibit B - Form of Bill of Sale and Assignment Agreement
Exhibit C - Form of Sublease Agreement
Schedule 1.1(j) - Certain Accounts
Schedule 1.2(b)(i) - Certain Facilities
Business of the Purchaser Entities. “Business of the Purchaser Entities” means the business of the Purchaser Entities as now being conducted and as presently proposed to be conducted.
Indemnitees. “Indemnitees” means the following Persons: the Purchaser and the Subsidiary and each of their respective officers, directors, members, employees, agents, heirs, successors and assigns.
Knowledge. The partiers are deemed to have “Knowledge” of a particular fact or other matter if: (a) in the case of the Seller, if Lon Bell or Timothy Burns is actually aware of such fact or other matter; or (b) in the case of either Purchaser Entity, if George Jones or Glen Haubl is actually aware of such fact or other matter.
Material Adverse Effect. A violation or other matter will be deemed to have a “Material Adverse Effect” on the Seller or the Purchaser Entities (and a “Material Adverse Effect” will be deemed to have occurred) if such violation or other matter (considered together with all other matters that would constitute exceptions to the representations and warranties set forth in the Agreement but for the presence of “Material Adverse Effect” or other materiality qualifications, or any similar qualifications, in such representations and warranties) would, or would reasonably be expected to, have a material adverse effect on, in the case of the Seller, the PPSA Business or the ability of the Seller to consummate the Transactions on a timely basis, or, in the case of the Purchaser Entities, the Business of the Purchaser Entities or the ability of the Purchaser Entities to consummate the Transactions on a timely basis.
Plan. “Plan” means an “employee benefit plan” as defined in Section 3.3 of ERISA, including each employment, salary, bonus, consulting, compensation, deferred compensation, incentive compensation, stock purchase, equity, severance pay, termination pay, hospitalization, medical, insurance, supplemental unemployment benefits, profit-sharing, pension, retirement, welfare, fringe benefit or other employee benefits plan, program or agreement, whether written or unwritten and whether funded or unfunded.
Proposed Employees. “Proposed Employees” means David Johns, Eric Martina, John Merritt, and Ed Roseberry.
Purchaser Disclosure Schedule. “Purchaser Disclosure Schedule” means the schedule (dated as of the date of the Agreement) delivered to the Seller on behalf of the Purchaser Entities and prepared in accordance with Section 9.15 of the Agreement.
Purchaser IP. “Purchaser IP” means all Intellectual Property Rights embodied in, relating to, or necessary to the Purchaser Entities in the conduct of the Business of the Purchaser Entities.
Seller Plan. “Seller Plan” means each Plan that is or has been sponsored, maintained, contributed to or required to be contributed to by the Seller or any ERISA Affiliate for the benefit of any Proposed Employees or with respect to which the Seller may have any liability.