Document:

ex10-23.htm

Exhibit 10.23

NEITHER THIS INVESTMENT UNIT NOR THE PROMISSORY NOTE UNDER ARTICLE I OF THIS INVESTMENT UNIT OR THE EQUITY SECURITIES ISSUABLE UPON EXERCISE OF THE RIGHT TO PURCHASE UNDER ARTICLE II OF THIS INVESTMENT UNIT (COLLECTIVELY, THE "SECURITIES REPRESENTED HEREBY") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. THE SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, TOGETHER WITH QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAW, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

Ideal Power Converters, Inc.

INVESTMENT UNIT

October 1, 2010

This Investment Unit (this "Unit") has been issued by the undersigned, Ideal Power Converter, Inc.], a Texas corporation (the "Company"), in connection with that certain Texas Emerging Technology Fund Award and Security Agreement (the "Fund Agreement"), effective as of the date hereof (the ..Effective Date"), by and between the Company and the State of Texas, acting by and through the Office of Governor Economic Development and Tourism, together with its nominees or assigns (the "OOGEDT'), pursuant to which the Company is receiving from the OOGEDT an award of funding under the Emerging Technology Fund subject to conditions which could, upon satisfaction, require repayment. This Unit is subject to all of the terms and provisions of the Fund Agreement.

This Unit consists of a promissory note (the "Note") and a right to purchase equity securities (the "Right to Purchase").

ARTICLE I

NOTE

Section 1.1 Promissory Note . This Article I consists of the Note.

Section 1.2 Promise to Pay. FOR VALUE RECEIVED, the Company hereby promises to pay to the order of the OOGEDT the principal sum equal to the full amount of all disbursements of the Award (as defined in the Fund Agreement) that are made prior to the First Qualifying Financing Transaction (as hereinafter defined) from time to time under the Fund Agreement (collectively, the "Principal") together with interest thereon at a rate of eight percent (8%) simple interest per annum accruing daily from the date such amounts are disbursed under the Fund Agreement and calculated on the basis of a 365 or 366 day year, as the case may be ("Interest"), as hereinafter set forth in this Article I.

Section 1.3 General Payment Terms. Principal and Interest due hereunder shall be paid in the lawful currency of the United States of America at such address as the OOGEDT may designate.

Section 1.4 Mandatory Repayment. The Principal, together with all accrued and unpaid Interest on the Principal balance shall be due and payable upon demand by the OOGEDT upon the occurrence of an Event of Default (as hereinafter defined) in accordance with the terms hereinafter set forth and the terms of the Fund Agreement. In the event of any conflict between the terms hereof and the terms of the Fund Agreement with respect to mandatory repayment, the terms of the Fund Agreement shall control.

Section 1.5 Optional Prepayment. The Company may pay, at its option, all sums of unpaid Principal and accrued but unpaid Interest at any time on or after eighteen (18) months following the Effective Date if the Company elects to terminate the Fund Agreement in accordance with Section 2. 13 of the Fund Agreement.

  

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Section 1.6 Cancellation of Note. This Note shall be canceled, the Principal and Interest evidenced hereby shall be irrevocably granted to the Company in its entirety and the Company shall be released of all covenants, liabilities and obligations under this Article I on and after the earlier of (a) the tenth anniversary of the Effective Date and (b) the date by which the OOGEDT has received a cash return (by way of (i) sale of shares to persons who are not then Company Associates or Company Affiliates or (ii) payment of a dividend) on the Common Stock, Prior Financing Shares or Next Financing Shares (each as hereinafter defined) that in aggregate equals or exceeds all sums of unpaid Principal and accrued but unpaid Interest at such time. The cancellation of this Note, if such event occurs, shall constitute a contribution of capital to the Company to facilitate the public purposes described in the Fund Agreement.

Section 1.7 Qualifying Liquidation Event. "Qualifying Liquidation Event" means (a) (i) a Stock Acquisition (as hereinafter defined) or (ii) a sale, conveyance, or other disposition of all or substantially all of the property or business of the Company and its subsidiaries (taken as a whole) or the Company's merger into or consolidation with any other corporation in which (in the case of (i) or (ii) above) more than fifty percent (50%) of the voting power of the Company is disposed of to persons who are not then Company Associates or Company Affiliates (each as hereinafter defined) and, (b) in each such case, in which the aggregate return received by the OOGEDT upon such event with respect to the Common Stock or Next Financing Shares, as the case may be, is equal to or greater than the total amount of the outstanding Principal and Interest due under this Note as of the date the OOGEDT receives such return.

Section 1.8 Events of Default.

(a) The occurrence or existence of any one of the following events or conditions shall constitute an "Event of Default" hereunder:

(i) the breach of any covenant or other tenn or condition of this Unit and the continuance thereof for a period of thirty (30) days after the OOGEDT's written notice to the Company thereof;

(ii) any of the Company's representations or warranties made in herein or in connection herewith being false or misleading inany material respect when made or as of the time as of which it was made; or

(iii) any "Event of Default" under the Fund Agreement, as such term is defined in the Fund Agreement.

(b) Upon the occurrence of any Event of Default, the OOGEDT shall have the right to (i) declare all sums of unpaid Principal and accrued but unpaid Interest and all other amounts properly payable hereon immediately due and payable and (ii) exercise any and all other rights available to it hereunder or under the Fund Agreement or at law or in equity, all of which rights and powers may be exercised cumulatively and not alternatively.

Section 1.9 Usury. Notwithstanding any provision to the contrary contained herein, the Fund Agreement or any other agreement entered into in connection with this Note or as security therefor or otherwise, it is expressly provided that in no case or event shall the aggregate of (a) all Interest on the unpaid balance of Principal, accrued or paid from the date hereof and (b) the aggregate of any other amounts accrued or paid pursuant hereto, which under applicable laws are or may be deemed to constitute interest upon the indebtedness evidenced hereby from the date hereof, ever exceed the Ceiling Rate (as hereinafter defined).In this connection, the Company and the OOGEDT stipulate and agree that it is their common and overriding intent to contract in strict compliance with applicable usury laws. In furtherance thereof, none of the terms hereof shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the Ceiling Rate. The Company or other parties now or hereafter becoming liable for payment of the indebtedness evidenced by the Note shall never be liable for interest in excess of the Ceiling Rate. If, for any reason whatever, the interest paid or received on the Note during its full term produces a rate which exceeds the Ceiling Rate, the OOGEDT shall credit against the principal of this Note (or, if such indebtedness shall have been paid in full, shall refund to the payor of such interest) such portion of said interest as shall be necessary to cause the interest paid on this Note to produce a

  

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rate equal to the Ceiling Rate. All sums contracted for, charged or received by the OOGEDT or the holder of this Note for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent required to avoid or minimize usury and to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the fuH stated term of this Note so that the interest rate does not exceed the Ceiling Rate. The provisions of this Section 1.9 shall control all agreements, whether now or hereafter existing and whether written or oral, between the Company and any holder of this Note. As used herein, the term "Ceiling Rate" means, on any day, the maximum nonusurious rate of interest permitted for that day by whichever of applicable federal or Texas laws permits the higher interest rate, stated as a rate per annum.

Section 1.10 Cost of Collection. Ifthe OOGEDT retains an attorney in connection with any Event of Default or to collect, enforce or defend this Note or any papers intended to secure or guarantee it in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if the Company sues the OOGEDT in connection herewith or any such papers and does not prevail, then the Company agrees to pay to the OOGEDT, in addition to the Principal and Interest , all reasonable costs and expenses incurred by the OOGEDT in trying to collect this Note or in any such suit or proceeding, including reasonable attorneys' fees.

Section 1.11 Waivers. Except for any notices that are specifically required by another provision hereof, the Company and any and all endorsers, guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such person agrees that his, her or its liability on or with respect to this Note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after the term hereof.

Section 1.12 Federal Tax Classification. It is expressly provided that the promise to pay to the order of the OOGEDT that is evidenced by this Note is not intended to be classified as indebtedness for U.S. federal income purposes unless and until an Event of Default occurs and the OOGEDT declares payable all sums of unpaid Principal. The Company and any and all endorsers, guarantors and sureties agree to report the Note consistent with this Section 1.12 for all U.S. federal income tax purposes except as otherwise required by law.

ARTICLE II

RIGHT TO PURCHASE

Section 2.1 Right to Purchase. This Article II consists of the Right to Purchase, which

certifies that, for the value received, the OOGEDT is entitled to purchase from the Company up to the number of shares set forth in Section 2.3 below (subject to adjustment in accordance with the provisions hereof) of either (a) shares of common stock of the Company, $0.01 par value per share ("Common Stock") or (b) shares ("Next Financing Shares") of the same class of capital stock or series of preferred stock as shall be issued in the First Qualifying Financing Transaction (as hereinafter defined).

Section 2.2 Purchase Price . The price per share (the "Purchase Price") of Common Stock or Next Financing Shares, as the case may be, purchased hereunder shall be $0.01 per share.

Section 2.3 Number of Shares.

(a) The number of shares of Common Stock (in the case of Section 2.3(a)(ii)(C) below) or Next Financing Shares (in the case of Section 2.3(a)(ii)(A) and or (B) below), to be issued upon the OOGEDT's exercise of this Right to Purchase shall be equal to the quotient obtained by dividing: exercise, by

(i)         The total amount of the Award disbursed as of the date of the exercise, by

  

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(ii)         Either:

 

 (A) if the First Qualifying Financing Transaction is closed and consummated on or before ninety (90) days after the Effective Date, then the Stock Price (as hereinafter defined) of such First Qualifying Financing Transaction; or

(B) if the First Qualifying Financing Transaction is closed and consummated after ninety (90) days following the Effective Date and on or prior to the date thirty (30) months after the Effective Date, then eight-tenths (0.80) multiplied by the Stock Price of such First Qualifying Financing Transaction; or

(C) if no First Qualifying Financing Transaction is closed and consummated on or before the date thirty (30) months after the Effective Date or the OOGEDT exercises its Right to Purchase prior to the closing and consummation of a First Qualifying Financing Transaction, then $7.3768.

(b) No fractional shares shall be issued upon the exercise of this Right to Purchase. Instead of any fractional share that would otherwise be issuable upon a conversion hereunder, the Company shall pay the OOGEDT a cash amount in respect of such fractional share based upon the applicable Stock Price of the whole shares of Common Stock or Next Financing Shares, as the case may be, issuable to the OOGEDT upon such exercise.

(c) The Company shall notify the OOGEDT in writing of the terms of the First Qualifying Financing Transaction at least fifteen (15) days prior to the anticipated closing of such transaction; (ii) deliver all material closing documentation regarding the First Qualifying Financing Transaction to the OOGEDT so that the OOGEDT actually receives such documentation within three (3) business days of the closing of the First Qualifying Financing Transaction; and (iii) and provide promptly such additional information to the OOGEDT as the OOGEDT may reasonably request.

(d) "Stock Price" means,as applicable:

(i) With respect to Common Stock, (A) if Common Stock is sold in the First Qualifying Financing Transaction , the price per share at which such Common Stock is sold in the First Qualifying Financing Transaction; (B) if Common Stock is not sold in the First Qualifying Financing Transaction, the price per share of capital stock that is sold in the First Qualifying Financing Transaction as determined by dividing (1) the total amount received by the Company as consideration for the sale of such capital stock, plus the minimum aggregate amount of additional consideration payable to the Company upon the conversion or exchange of all such capital stock into Common Stock, if any, by (2) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of such capital stock; or (C) if there has been no First Qualifying Financing Transactions, then $7.3768 per share; and

(ii) With respect to Next Financing Shares, the lesser of (i) the average price per share of Next Financing Shares, if any, that are sold to Company Associates and/or Company Affiliates in the First Qualifying Financing Transaction and (ii) the average price per share of Next Financing Shares that are sold to investors other than Company Associates and/or Company Affiliates m the First Qualifying Financing Transaction .

(e) "Company Associates" means, as of any particular date, the current shareholders of the Company (including the holders of Common Stock, preferred stock, or other capital stock of the Company), current debtholders of the Company , and current holders of convertible securities or holders of any right to purchase or acquire any capital stock of the Company .

(f) "Company Affiliate" means a person who or that directly, or indirectly through one or more intermediaries, controls the Company or is controlled by, or is under common control with, such a person.

  

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(g) "Associate Debt" means debt of the Company outstanding on the date of the First Qualifying Financing Transaction (regardless of whether such debt is evidenced by a promissory note, a convertible promissory note or any other form or instrument) that is owed to any Company Affiliate or any person (or any affiliate of such person) that is purchasing capital stock from the Company in the First Qualifying Financing Transaction.

(h) "Stock Acquisition" means the sale by the Company's shareholders of all of the issued and outstanding shares of capital stock of the Company to an acquiring person or entity.

(i) ''Threshold Amount" means the lesser of (i) Five Hundred Thousand Dollars ($500,000) and (ii) the amount of the Award disbursed on the date of the closing of the First Qualifying Financing Transaction.

(j) "First Qualifying Financing Transaction" means the earlier of (i) a Qualifying Liquidation Event and (ii) the first issuance and sale of Common Stock of the Company or other classes or series of authorized capital stock of the Company (excluding, however, (A) any securities of the Company, other than capital stock, that are convertible into or exchangeable or exercisable for capital stock of the Company, such as warrants, options, or convertible debt and (B) any capital stock issued in exchange for the retirement or partial retirement of any Associate Debt, including without limitation any capital stock issued in exchange for any future promise to retire or partially retire any Associate Debt) to occur following the Effective Date in a public offering or private placement, for an aggregate amount of cash consideration received by the Company from persons other than Company Associates or Company Affiliates equal to or greater than the Threshold Amount; provided, however, that, with respect to clause (ii) above, the cash proceeds received as consideration by the Company in the First Qualifying Financing Transaction shall not be directly used in any single transaction or any series of related transactions to make payments on any Associate Debt (unless the Company receives cash proceeds in the First Qualifying Financing Transaction in excess of the Threshold Amount, in which case such excess amount may be used to make payments on Associate Debt) .

Section 2.4 Purchase Procedure .

(a) The purchase rights represented by this Right to Purchase are exercisable by the OOGEOT or its permitted assignee, in whole or in part, at any time on or after the Vesting Date (as hereinafter defined) and on or before the earlier of ninety (90) days after (a) the First Qualifying Financing Transaction and (b) the date thirty (30) months after the Effective Date, by delivering to the principal office of the Company, or at such other office or agency as the Company may designate by notice in writing to the OOGEDT, a duly executed Notice of Purchase in the form attached hereto as Exhibit A and, upon payment of the per share Purchase Price multiplied by the total number of shares thereby purchased (the "Aggregate Purchase Price") (at the sole option of the OOGEDT, to be paid by cash or by check or bank draft payable to the order of the Company, by cashless exercise as described below or by cancellation of indebtedness of the Company to the OOGEDT), whereupon the OOGEDT shall be entitled to receive a certificate for the number of shares of Common Stock or Next Financing Shares, as the case may be, so purchased. The OOGEDT, in its sole discretion, shall elect whether to purchase Common Stock or Next Financing Shares upon its exercise of the purchase rights hereunder.

(b) "Vesting Date"means the earlier of (i) the date thirty (30) months after the Effective Date; (ii) the date on which the First Qualifying Financing Transaction is closed and consummated; or (iii) the date on which any of the following events occur: (A) any capital reorganization or any reclassification of the capital stock of the Company; (B) any consolidation or merger of the Company; (C) the disposition or transfer of assets of the Company other than in the ordinary course of the Company's business; (D) any dividend or other distribution to the holders of capital stock of the Company in the form of any asset, including without limitation securities of the Company; or (E) the dissolution, liquidation or winding up of the Company; or(iv) the date of a Stock Acquisition.

  

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Section 2.5 Cashless Exercise. In lieu of paying the Purchase Price, the OOGEDT may exercise its purchase rights hereunder by cashless exercise, which shall be effected by converting the Right to Purchase (the "Conversion Right") into shares of Common Stock or Next Financing Shares, as the case may be, as follows. Upon exercise of the Conversion Right with respect to a particular nwnber of shares of Common Stock or Next Financing Shares, as the case may be (the «Converted Right"), the Company shall deliver to the OOGEDT (without payment by the OOGEDT of any cash, cancellation of indebtedness or delivery of any other consideration) that number of shares of Common Stock or Next Financing Shares, as the case may be, equal to the quotient obtained by dividing (a) the difference between (i) the product of the Stock Price of a share of Common Stock or Next Financing Shares, as the case may be, and the number of such shares into which the Converted Right could have been exercised hereunder and (ii) the Aggregate Purchase Price that would have been payable upon such exercise of the Converted Right, by (b) the applicable Stock Price.

Section 2.6 Issuance of Shares. The issuance of Next Financing Shares upon exercise of the purchase rights under this Right to Purchase shall be upon and subject to the same terms and conditions (other than price or timing) applicable to the First Qualifying Financing Transaction and, subject to Section 3. 4 below, the OOGEDT shall be entitled to all the same rights and preferences with respect to each share of Next Financing Shares held by the OOGEDT to which all other holders of shares of the same class and series of stock are entitled. All shares of Common Stock or Next Financing Shares, as the case may be, issued to the OOGEDT upon a purchase hereunder shall be validly issued, fully paid, non-assessable and free from all tax.es, liens and charges. In case the OOGEDT shall exercise this Right to Purchase with respect to less than all of the shares that may be purchased hereunder, or if future disbursements of the Award are made under the Fund Agreement following any exercise hereof, this Right to Purchase shall thereafter represent the right to purchase the balance of such shares and any additional shares represented by such additional Award disbursement. The issuance of certificates for shares upon exercise of this Right to Purchase shall be made without charge to the holder thereof for any issuance tax in respect thereof or other cost incurred by the Company in connection with such exercise and the related issuance of the shares. Notwithstanding anything to the contrary provided herein, the OOGEDT shall not be required to execute, join or become a party to any other agreement, including any shareholders agreement, in connection with the issuance to the OOGEDT of Next Financing Shares or Common Stock.

Section 2.7 Reservation of Shares. The Company shall at all times reserve and keep available out of its authorized but unissued Common Stock, and once designated, Next Financing Shares, solely for the purpose of issuance upon the exercise of this Right to Purchase, the maximum number of shares issuable upon the exercise of this Right to Purchase. If at any time the number of authorized but unissued shares shall not be sufficient to permit exercise of this Right to Purchase, the Company shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock and Next Financing Shares to such number of shares as shall be sufficient for such purpose.

Section 2.8 Certain Adjustments. The number of shares of Common Stock or Next Financing Shares, as the case may be, purchasable hereunder and the Purchase Price shall be subject to adjustment from time to time as hereinafter provided.

(a) In case of (i) any capital reorganization or any reclassification of the capital stock of the Company, (ii) any consolidation or merger of the Company, (iii) the disposition or transfer of assets of the Company other than in the ordinary course of the Company's business , (iv) any dividend or other distribution to the holders of capital stock of the Company in the form of additional shares of capital stock of the Company or its subsidiaries, property or securities held by the Company or its subsidiaries (other than cash) or=rights, options or warrants to purchase or otherwise acquire shares of capital stock of the Company or its subsidiaries, or (v) the dissolution, liquidation or winding up of the Company, this Right to Purchase shall thereafter be exercisable for and the OOGEDT shall thereafter be entitled to purchase (and it shall be a condition to the consummation of any such transaction or event that appropriate provision shall be made so that the OOGEDT shall thereafter be entitled to purchase) the kind and amount of shares of stock and other securities and property receivable in connection with such transaction by a holder of the number of shares of Common Stock or Next Financing Shares, as the case may be, for which this Right to Purchase entitled the OOGEDT to purchase immediately prior to such capital reorganization, reclassification of capital stock, non-surviving combination or disposition or other transaction; and in any such case appropriate adjustments shall be made in the application of the provisions of this paragraph with

  

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respect to rights and interests thereafter purchasable upon the exercise of this Right to Purchase and the Purchase Price. In the case of a capital reorganization or reclassification , the number of shares that the OOGEDT is entitled to purchase hereunder shall be proportionately increased in the case of a split or subdivision or proportionately decreased in the case of a combination and the Purchase Price shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination.

(b) In the case of any cash dividends declared or paid on the Common Stock or the Next Financing Shares, as the case may be, of the Company prior to the exercise of this Right to Purchase, the OOGEDT shall be entitled, upon exercise of this Right to Purchase, to receive the value of any such dividends to the full extent as if the OOGEDT had exercised this Right to Purchase as of the date of declaration or payment of any such dividend. The OOGEDT, in its sole discretion, shall elect one of the two following methods for the Company to pay the value of such dividends to the OOGEDT: (i) in cash or (ii) by adjusting this Right to Purchase to represent the right to acquire, in addition to the number of shares receivable upon exercise hereof, and without payment of any additional consideration therefor, the amount of such other shares of Common Stock or Next Financing Shares, as the case may be, of the Company that such holder could have purchased with such cash dividend at the Stock Price had it received such cash dividends on the date of their distribution and had thereafter retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions hereof .

(c) Notice of Ad justments or Dividends. Upon any event that has the effect of causing an adjustment of shares of securities purchasable (or payment of dividends) upon exercise of this Right to Purchase, a certificate, signed by (i) an authorized officer of the Company or (ii) an independent firm of certified public accountants selected by the Company at its own expense, setting forth in reasonable detail the events requiring the adjustment and the method by which such adjustment was calculated, shall promptly be mailed to the OOGEDT and shall specify the adjusted Purchase Price and the number of shares of securities (and payment of dividends) purchasable upon exercise of this Right to Purchase after giving effect to the adjustment.

Section 2.9 Stock Certificate Legend. Each certificate representing shares of Common Stock or Next Financing Shares issued pursuant to this Right to Purchase shall be imprinted with a legend in substantially the following form:

	  	
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT''), ANDMAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTEREDUNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME.

 

THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN INVESTMENT UNIT AND AN EMERGING TECHNOLOGY FUND SECURITY AND AWARD AGREEMENT, EACH DATED AS OF OCTOBER 1 2010 BYANDBETWEENTHE COMPANY AND THE STATE OF TEXAS, ACTING BY AND THROUGH THE OFFICE OF GOVERNOR ECONOMIC DEVELOPMENT AND TOURISM, WHICH INVESTMENT UNIT AND AGREEMENT CONTAIN, AMONG OTHER PROVISIONS, RESTRICTIONS ON THE TRANSFER SALE, OR OTHER DISPOSITION OF THE SHARES EVIDENCED BY THIS CERTIFICATE. A COPY OF SUCH INVESTMENT UNIT AND AGREEMENT HAS BEEN FILED, AND IS AVAILABLE FOR REVIEW BY THE RECORD HOLDER OF THIS CERTIFICATE, AT THE PRINCIPAL OFFICE OF THE COMPANY.

  

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Section 2.10 No Impairment. So Jong as this Right to Purchase is outstanding and unexercised, the Company shall not, by amendment of its certificate of formation (or other formation document) or bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the OOGEDT hereunder against impairment.

ARTICLE III 

MISCELLANEOUS

 

Section 3.1 Representations and Covenants of the Company.

(a) The Company shall comply with the Act, all applicable state securities laws, and all other applicable laws and regulations in respect of the issuance of this Unit and the issuance of any securities issued or issuable under Article II hereof, and shall timely make all required filings and reports under such laws and regulations.

(b) The Company represents that it has the power to issue this Unit and to carry out the obligations hereunder, and the execution, delivery and performance by the Company of this Unit has been duly authorized by all necessary corporate action.

(c) The Company shall maintain or cause to be maintained books, records, documents and other evidence pertaining to compliance with the requirements contained in this Unit, and during all such time when the OOGEDT is holding this Unit or any securities issued upon the exercise of the Right to Purchase under Article II hereof, upon request shall allow or cause the entity which is maintaining such items to allow the OOGEDT, or auditors for the OOGEDT, including the State Auditor for the State of Texas, to inspect, audit, copy, or abstract, all of its books, records, papers, or other documents relevant to this Unit and the securities issued or issuable upon exercise of the Right to Purchase under Article II hereof. The Company shall use or cause the entity that is maintaining such books and records to use generally accepted accounting principles in the maintenance of such books and records, and shall retain or cause to be retained all of such books, records, documents and other evidence for a period of seven (7) years from and after the later of (i) the date that the Fund Agreement is terminated or the Fund Agreement's tenn expires and (ii) unless the Right to Purchase hereunder expires without having been exercised, the date on which the OOGEDT fully divested all rights and ownership of all stock that was issued upon the OOGEDT's exercise of its Right to Purchase under Article II hereof.

Section 3.2 Representations and Covenants of the OOGEDT. The OOGEDT, by acceptance of this Right to Purchase, agrees that the right to purchase shares of Common Stock, Next Financing Shares or other securities to be issued upon exercise hereof are being acquired for the OOGEDT's own account to be held on behalf of the State of Texas pursuant to the provisions of Chapter 490 of the Texas Government Code and that the OOGEDT shall not offer, sell or otherwise dispose of this Right to Purchase or any shares issuable hereunder except under circumstances that will not result in a violation of the Act or any securities laws of any state. Otherwise, the OOGEDT is permitted at any time and without limitation to offer, sell or otherwise dispose of this Right to Purchase and any shares of securities issued hereunder in a manner that is in compliance with the Act and any applicable state securities laws of, including making such offers, sales or dispositions under Rule 144 of the Act. Prior to any offer, sale, or other disposition of this Right to Purchase and any securities issued hereunder, the OOGEDT shall provide the Company with fifteen (15) days written notice thereof.

Section 3.3 Notices . Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or by recognized overnight courier or personal delivery at the respective addresses of the parties as set forth herein or on the register maintained by Company. The Company and the OOGEDT may by notice so given change the OOGEDT's and the Company's respective address for future notice hereunder. Notice shall conclusively be deemed to have been given when received. The current addresses for notice are as follows:

  

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To OOGEDT: Financial Services

ETF Compliance PO Box 12878

Austin, TX 78711-2878

Email: ETF.Compliance@governor.state.tx.us

with a concurrent copy to:

ATTN: Emerging Technology Fund Award Program General Counsel

Office of the Governor

P.0 Box 12428 

Austin, Texas 78711 

Phone: 512-463-1788 

Fax: 512-463-1932

To Company:

William C. Alexander, President

Ideal Power Converters, Inc.

1225 Overlook Circle

Spicewood, Texas 78669

Phone: (512) 560-0774

Fax: (512) 687-5357

with a concurrent copy to:

Thomas F. Ryan Attorney at Law 

1216 Edgewater Dr.

Spicewood, Texas 78669

Phone:(512) 289-7382

Fax: (830) 596-0400

Attn: Tom Ryan

Section 3.4 No Rights as Shareholder. Nothing in the Unit shall be construed as conferring on the OOGEDT or any other person any voting rights or other rights as a shareholder of the Company . Further, from and after any exercise of the Right to Purchase under Article II hereof, so long as the OOGEDT holds such capital stock, the OOGEDT shall grant a revocable proxy (the "'Proxy") of all its voting rights to the then-current Chief Executive Officer (or, if no Chief Executive Officer is then serving, President) of the Company with respect to each matter that is presented for a vote to holders of capital stock held by the OOGEDT, substantially in the form attached hereto as Exhibit B (which form shall provide, among other things, that such Proxy shall be voted in proportionate accordance to the votes of such other holders (holding shares of the same class and series of stock as the OOGED1) on the matter). It is the general intent of the OOGEDT not to revoke the Proxy unless the OOGEDT's rights and interests would be adversely and disproportionately effected in connection with a matter on which the OOGEDT otherwise would have the right to vote, and any such determination regarding whether any such matter has or would have an adverse or disproportionate effect on the OOGEDT' s rights and interests shall be made in the sole discretion of the OOGEDT. Notwithstanding anything to the contrary herein, in the Fund Agreement or in connection with the OOGEDT's grant of the Proxy, upon exercise of the Right to Purchase hereunder, the OOGEDT shall become the record holder of the Common Stock or Next Financing Shares, as the case may be, and shall have all legal and beneficial ownership rights thereto at all times (except as is specifically set forth in the Proxy). In addition, notwithstanding the OOGEDT's grant of the Proxy, the Company shall provide the OOGEDT with all notices to which holders of Common Stock or Next Financing Shares, as the case may be, are entitled, including without limitation all notices of shareholders' meetings and all notices of any votes upon any matters submitted for a vote of the holders of Common Stock or the Next Financing Shares, as the case may be, which notices shall be delivered by the Company to the OOGEDT on or before such date as shall provide the OOGEDT with adequate time to revoke the Proxy prior to such meeting or vote if the OOGEDT so chooses.

  

-9-

  

 

Section 3.5 Right of First Offer. Ifthe OOGEDT shall decide at any time that it wants to sell, transfer or assign all or any portion of its Common Stock or Next Financing Shares (as the case may be, the "Offered Shares") to any person or entity that is not another Texas state agency, the OOGEDT shall first provide the Company with a written offer to sell the Offered Shares to the Company at a specified price per share. The Company shall then have thirty (30) days to accept or reject such offer with respect to all but not less than all of the Offered Shares. If the Company irrevocably accepts the offer within the applicable time period, the Company shall have an additional thirty (30) days to complete the purchase of the Offered Shares. The Company shall be permitted to assign its purchase right under this Section 3.5 to one or more of its executive officers, but this right shall be otherwise non-assignable by the Company. If the Company rejects the offer or fails to accept the offer within the applicable time period with respect to all of the Offered Shares, then the OOGEDT may sell all or a portion of the Offered Shares that have been offered but not accepted for purchase by the Company within one hundred eighty (180) days of such rejection or expiration of the time period for response to any person or entity; provided, that the OOGEDT does not sell any of the Offered Shares for less than one hundred percent ( l00%) of the per share price the OOGEDT offered to the Company. If the OOGEDT does not sell the Offered Shares within the time period and for the price indicated above, it must comply again with the provisions of this Section 3.5 before selling all or any portion of the Offered Shares.

Section 3.6 Unit Register. The Company shall maintain at its principal executive office books for the registration and the registration of transfer of the Unit. The Company may deem and treat the OOGEDT as the absolute owner hereof (notwithstanding any notation of ownership or other writing thereon made by anyone) for all purposes, and neither the Company nor the OOGEDT shall be affected by any notice to the contrary.

Section 3.7 Transfers. The Company shall not close its books against the transfer of this Unit or of any shares issued or issuable upon the exercise of the Right to Purchase under Article JI hereof in any manner which interferes with the timely exercise of the Right to Purchase.

Section 3.8 Assignment. Except as specifically set forth in Section 3.5. the Company may not assign this Unit or any of its rights or obligations hereunder without the prior written consent of the OOGEDT. Except as otherwise required by Section 3.5 above, the OOGEDT may assign this Unit and any of its rights or obligations hereunder without the consent of the Company but shall provide the Company with fifteen (15) days written notice of such assignment. Subject to the foregoing, this Unit and all terms, provisions and obligations set forth herein shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns and all other state agencies and any other agencies, departments, divisions, governmental entities, public corporations and other entities that shall be successors to any of the parties or that shall succeed to or become obligated to perform or become bound by any of the covenants, agreements or obligations hereunder of any of the parties hereto.

Section 3.9 Governing Law and Venue. This Unit shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America from time to time in effect, without regard to any otherwise applicable conflict of law rules or requirements . The Company and all endorsers, guarantors and sureties irrevocably agree that any action, claim, suit, litigation or other proceeding (collectively, "Litigation") arising out of or in any way relating to this Unit, or the matters referred to therein, shall be commenced exclusively in the Travis County District Court or the United States District Court for the Western District of Texas, Austin Division, and hereby irrevocably and unconditionally consents to the exclusive jurisdiction of those courts for the purpose of prosecuting and/or defending such Litigation. The Company and all endorsers, guarantors and sureties hereby waive and agree not to assert by way of motion, as a defense, or otherwise, in any Litigation that (a) the Company is not personally subject to the jurisdiction of the above-named courts, (b) the Litigation is brought in an inconvenient forum or (c) the venue of the Litigation is improper.

Section 3.10 Replacement. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Unit and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to the Company, or in the case of any such mutilation, upon surrender and cancellation of the mutilated Unit, the Company shall execute and deliver, in lieu thereof, a new Unit of like date and tenor.

  

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Section 3.11 Saturdays. Sundays. Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

Section 3.12 Proceeds. Ibis Unit, the securities issuable upon exercise of the Right to Purchase under Article II hereof, and all amounts of cash or other benefits earned or received by the OOGEDT hereunder or by sale hereof, are held for and on behalf of the State of Texas. Any and all cash received by the OOGEDT under or by sale of this Unit or the securities issuable under the Right to Purchase shall be deposited into the Emerging Technology Fund in accordance with Chapter 490 of the Texas Government Code.

Section 3.13 Severability . If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason , the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

Section 3.14 Further Assurances. The Company and the OOGEDT shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations or other actions by, or giving any notices to, or making any filings with, any governmental authority or any other person, and otherwise fulfilling, or causing the fulfillment of, the various obligations made herein), as may be reasonably required or desirable to carry out or to perform the provisions of this Unit and to consummate and make effective as promptly as possible the transactions contemplated by this Unit.

Section 3.15 Agreement by OOGEDT. Receipt of this Unit by the OOGEDT shall constitute acceptance of and agreement to the foregoing terms and conditions.

Section 3.16 Amendment. Any term of this Unit may be amended and the observance of any term of this Unit may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the OOGEDT.

Section 3.17 Headings. The section headings in this Unit are inserted for purposes of convenience only and shall have no substantive effect.

Section 3.18 Survival. The warranties, representations and covenants contained in or made pursuant to this Unit shall survive the execution and delivery ofthis Unit and shall survive any breach, expiration or termination of the Fund Agreement. Notwithstanding anything herein to the contrary, this Unit, including without limitation the Right to Purchase under Article II hereof, shall survive the repayment of the Note.

 

Section 3.19 Exhibits. The exhibits referred to herein are hereby incorporated fully herein by this reference.

[ Remainder of page intentionally left blank.]

  

-11-

  

 

 

IN WITNESS WHEREOF, the Company has caused this Investment Unit to be sigoed by its duly authorized officers in Spicewood, Texas as of the date and year first written above.

Ideal Power Converters, Inc.

By: /s/ William Alexande

Name: William Alexande

Title: President

	  	  

  

-12-

  

 

EXHIBIT A

Notice of Purchase

The undersigned, representing the State of Texas, acting by and through the Office of Governor Economic Development and Tourism, together with its nominees or assigns (the "OOGEDT"), pursuant to the provisions of the Investment Unit, dated l] (the ‘Unit"), issued to the OOGEDT by Ideal Power Converters, Inc., a Texas corporation (the "Company"), hereby agrees to subscribe for and purchases shares of [Common Stock I Series _ Preferred Stock], par value $0.01 per share, of the Company covered by the Right to Purchase (as defined in the Unit), and makes such payment therefor in full at the Purchase Price (as defined in the Unit) either in cash, by cashless exercise or by other method as provided by the Unit.

Signature:

Name:

Title:

Dated:

INSTRUCTIONS FOR REGISTRATION OF STOCK:

Name:

(please type or print in block letters)

Address:

Address:

 

  

-13-

  

 

Exhibit B

	
Form of Revocable Proxy CONTINUING REVOCABLE PROXY

	  

The State of Texas, acting by and through the Office of the Governor Economic Development and Tourism (the "undersigned"), hereby grants to the then-current Chief Executive Officer (or, if no Chief Executive Officer is serving, President) , of Ideal Power Converters, Inc., a Texas corporation (the "Company"), a proxy with full power of substitution to vote, or execute and deliver written consents or otherwise act with respect to the [INSERT NUMBER] shares of Stock the undersigned owns, beneficially or of record, that were issued to the undersigned by the Company on_, 2_, in proportionate accordance to the votes on the applicable matter of such other holders of the Company's Stock who hold shares of the same class and series as held by the undersigned,_as fully, to the same extent and with the same effect as the undersigned might or could do under any applicable laws or regulations governing the rights and powers of shareholders of a Texas corporation, and in connection therewith to execute any docwnents which are necessary or appropriate in order to effectuate the foregoing, on any matter requiring the vote of the holders of the Stock, or by written consent in lieu of a meeting, or otherwise, or whether such vote is to be cast in person, or by proxy, or as otherwise permitted by law. The proxy granted herein (x) shall be revocable at any time by the undersigned upon notice by the undersigned to the Company and, (y) notwithstanding Section 21.368 of the Texas Business Organizations Code, Article 2.29(C) of the Texas Business Corporation Act, or and similar or successor statute, shall remain valid and in effect from the date hereof until the date it is revoked as described in clause(x) preceding.

Date: _____, _ 2_____

THE STATE OF TEXAS

______________________

By: Raymond C. Sullivan

Title: Chief of Staff

Office of the Governor

 

  

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Exhibit C

Milestones

	1.	
Achieve full power, sustained operation of the Ideal Power Converte (!PC) 30 kW So1ar Inverter in IPC Jab, as measured by DC power measurements using a Fluke Corporation DC ammeter and voltage meter. Tests to be witnessed by Austin Energy engineering personnel. Test report to be provided.

	
2.

	
The IPC 30 kW Solar Inverter is to be verified for safe operation on the utility grid, as required by Austin Energy before installation at the Austin Convention Center, to be verified by lntertek., a Nationally Recognized Test Lab. Intertek will also perform testing to verify that the inverter achieves a minimum efficiency of 94% at 30 kW. Test report to be provided.

	
3.

	
Install the IPC 30 kW Solar Inverter and demonstrate operation at Austin Convention Center (ACC), as verified by Austin Energy.

	
4.

	
Demonstrate Maximum Power Point Tracking (MPPn of the IPC 30 kW Solar Inverter inthe installed configuration at the ACC. The inverter will be run in Auto-MPPT mode with stable sunlight conditions and the unit allowed to find the Maximum Power Point. The unit will then be run in manual mode to find the Maximum Power Point to verify that Auto-MPPT finds the maximum power point to within 2%. Test report to be provided .

	5.	
Operate the lPC 30 kW Solar Inverter on the 22 kW ACC for at least one week, without maintenance, as verified by Austin Energy. The array output may be lower than 22 kW due to seasonal solar effects.

 

  

-15-

  

 

Exhibit D

Unit Amendment

  

-16-

  

 

Schedule 2.06(G) Title to Property

	
The Company owns all tools, furniture and equipment situated at 5004 Bee Creek Road, Spicewood , Texas 78669. No liens or debt is associated with such property]

 

  

-17-

  

 

 

Schedule 2.06(11) Related Party Transactions

No related party transactions exist.

 

  

-18-

  

 

Schedule 2.06(,J) Subsidiaries

The Company has no subsidiaries.

  

-19-

  

 

Schedule 2.06(K)

Organizational Information

Name and Purpose: Under the Certificate of Formation the Company was formed as a for¬ profit corporation for any lawful purpose and named "Ideal Power Converters, Inc.".

Registered Agent, Registered Office, and Other Offices: The registered agent is an individual resident of this state whose name and address is set forth below:

William C. Alexander 1225 Overlook Circle

Spicewood, Texas 78669

The business address of the registered agent and the registered office is:

 

1225 Overlook Circle

Spicewood, Texas 78669

An operations office was acquired by lease and is situated at 5004 Bee Creek Road, Suite 600, Spicewood, Texas 78669

Directors: Three Directors constituted the initial board of directors who were to serve as directors until the first annual meeting of shareholders or until their successors are elected or qualified were as follows :

Director 1.

William C. Alexander

1225 Overlook Circle

Spicewood, Texas 78669

Director 2.

David Breed, M.D.

923 Lakeshore Dr.

Spicewood, Texas 78669

Director 3.

Hamo Hacopian

10375 Richmond Ave., Suite 1515

Houston, Texas 77042

Fourth Director authorized by amendment to Bylaws at Special Meeting of Board of Directors appointed on July 11, 2009, to wit:

	  	
Charles De Tarr

7105 Valburn Austin, Texas 78731

 

The above named four (4) Directors are the current Directors .

Officers: The Officers of the Company is as follows:

William C. Alexander, President

Charles De Tarr, Secretary and Treasurer

Paul Bundschuh, Vice-President of Business Development

  

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Corporate Counsel: Corporate Counsel is as follows:

Thomas F. Ryan, Attorney at Law

1216 Edgewater Dr.

Spicewood, Texas 78669

Board of Advisors: The following are members of a Board of Advisors to the Company:

Robert King of Goode Company;

Dr. Michael Webber of the University of Texas at Austin; and

Mitch Jacobsen of Austin Technology Incubator

Authorized Shares: The total number of shares the corporation is authorized to issue is four million (4,000,000) shares. The par value of each of the authorized shares is one cent ($0.01).

Effective Date: The corporation's effective or beginning date was May 17, 2007.

Organizer: Thomas F. Ryan

     Attorney at Law

     1216 Edgewater Dr

    Spicewood, Texas 78669

  

-21-

  

 

Schedule 4.09 Financing Statements

No known financing statements have been filed.

 

 

 

-22-ex10-25.htm

Exhibit 10.25

BEE CREEK CENTER

COMMERCIAL  LEASE

 

Table of Contents

 

	No.          Paragraph Description	Pg.	 	No.          Paragraph Description	Pg.
	1.     Parties	 	 	22.     Holdover	 
	2.     Leased Premises	 	 	23.     Landlord's Lien & Security Interest	 
	3.     Term	 	 	24.     Assignment and Subletting	 
	    A.  Term	 	 	25.     Relocation	 
	    B.   Delay of Occupancy	 	 	26.     Subordination	 
	4.     Rent and Expenses	 	 	27.     Estoppel Certificates	 
	    A.   Base Monthly Rent	 	 	28.     Casualty Loss	 
	    B.   First Full Month's Rent	 	 	29.     Condemnation	 
	    C.   Prorated Rent	 	 	30.     Attorney's Fees	 
	    D.   Additional Rent	 	 	31.     Representations	 
	    E.   Place of Payment	 	 	32.     Brokers	 
	    F.   Method of Payment	 	 	33.     Addenda	 
	    G.   Late Charges	 	 	34.     Notices	 
	    H.   Returned Checks	 	 	35.     Special Provisions	 
	5.     Security Deposit	 	 	36.     Agreement of the Parties	 
	6.     Taxes	 	 	 	 
	7.     Utilities	 	 	ADDENDA & EXHIBITS (check all that apply)	 
	8.     Insurance	 	 	 	 
	9.     Use and Hours	 	 	[   ]    Exhibit A-2013 Estimated Annual Expenses	 
	10.     Legal Compliance	 	 	[   ]    Exhibit __________________	 
	11.     Signs	 	 	[   ]    Commercial Lease Addendum for Broker's Fee	 
	12.     Access By Landlord	 	 	[X]    Commercial Lease Expense Reimbursement 	 
	13.     Move-In Condition	 	 	     Addendum	 
	14.     Move-Out Condition	 	 	[   ]    Commercial Lease Addendum for Extension	 
	15.     Maintenance and Repairs	 	 	          Option	 
	    A.   Cleaning	 	 	[   ]    Commercial Lease Addendum for Percentage	 
	    B.   Conditions Caused by a Party	 	 	          Rent	 
	    C.   Repair & Maintenance Responsibility	 	 	[   ]    Commercial  Lease Parking Addendum	 
	    D.   Repair Persons	 	 	[   ]    Commercial Landlord's Rules and Regulations	 
	    E.   HVAC Service Contract	 	 	[   ]    Commercial Lease Guaranty	 
	    F.   Common Areas	 	 	[   ]    Commercial Lease Right of First Refusal	 
	    G.   Notice of Repairs	 	 	          Addendum	 
	    H.   Failure to Repair	 	 	[   ]    Commercial Lease Addendum for Optional	 
	16.     Alterations	 	 	          Space	 
	17.     Liens	 	 	[   ]    Commercial Leasehold Construction Addendum	 
	18.     Liability	 	 	[   ]    _____________________________	 
	19.     Indemnity	 	 	[   ]    _____________________________	 
	20.     Default	 	 	 	 
	21.     Abandonment, Interruption of Utilities,	 	 	 	 
	          Removal of Property & Lockout	 	 	 	 

 

Initialed for Identification by Tenants: CPL, PB, and Landlord: ___

  

-1-

  

 

LEASE AGREEMENT

 

1.  PARTIES: The parties to this lease are:

 

Tenant:  IDEAL POWER CONVERTERS (hereafter "Tenant")

 Landlord: TEXAS PUBLIC EMPLOYEES ASSOCIATION, a Texas nonprofit corporation (hereafter "Landlord").

 

2.  LEASED PREMISES:

 

A.    Landlord  leases to Tenant the following  described  real  property,  known  as the \1leased  premises," along with  all  its improvements (Check only one box):

 

[X] (1)   Multiple-Tenant Property: Suite or Unit Number 600 and 620 containing approximately 3750 square feet of rentable area in Bee Creek Center at 5004 Bee Creek Road (address) in Spicewood (city), Travis (county), Texas, which is legal described as follows:

 

Lots 3 and 4, Block A of Bee Creek Commercial Center, Section One, a subdivision in Travis County, Texas, according to the map or plat thereof. recorded under Document No. 200100099 of the Official Public Records of Travis County, Texas.

 

(2)   Single-Tenant Property: The real property at:  ________________  (address) in (city), ________________(county), Texas, which is legally described on attached Exhibit__ or as follows:  __________________________.

 

B.  If Paragraph 2A (1) applies:

 

(1)  "Property" means the  building  or complex in which  the  leased  premises  are located,  inclusive  of  any common areas, drives, parking areas, and walks; and

 

(2)    the parties  agree that the rentable  area  of the  leased  premises  may  not equal the actual  or useable  area within the leased premises and may include an allocation of common areas in the Property.

 

3.  TERM:

 

A.  Term: The term of this lease is 12 months and ________ days, commencing on:

 

June 1, 2013 (Commencement Date) and ending on

 

May 31, 2014 (Expiration Date).

 

  

-2-

  

 

B. Delay of Occupancy: If Tenant is unable to occupy the leased premises on the Commencement Date because of (i) construction on the leased premises to be completed by Landlord but which is not substantially complete or (ii) a prior tenant1s holding over on the leased premises, Landlord will not be liable to Tenant for such delay and this Lease Agreement will  remain enforceable. In the event of such a delay, the commencement date will automatically be extended  to the  date  Tenant  is able  to  occupy  the  property  and the  expiration  date  will  also  automatically  be extended by a like number of days, so that the length of this Lease remains the unchanged.   If Tenant is unable to occupy the leased premises no later than the ninety-first (91st) day, Tenant may terminate this Lease Agreement by giving written notice thereof to Landlord prior to the leased premises becoming available for occupancy. Absent such written notice, this L_ease Agreement will be in good standing and Tenant shall be liable for performance hereunder at the time the leased premises are available for occupancy. If, however, the delay extends and such written notice is given, Landlord will refund any amounts paid under this Lease Agreement to Tenant.

 

C. Unless the parties agree otherwise, Tenant is responsible for obtaining a certificate of occupancy for the lease premises if required by a governmental body.

 

D. If Tenant determines to vacate the Leased premises at the end of the term, it shall give Landlord thirty (30) days prior notice of such determination. If timely notice if not given, Tenant agrees to pay a sum equal to one month's rent to Landlord even though Tenant will not occupy the Leased premises for the extra month.

 

4.  RENT AND EXPENSES:

 

A.  Base Monthly Rent: On or before the first day of each month during this lease, Tenant will pay Landlord base monthly rent as described as follows:

 

from June 1, 2013 to May 31, 2014: $2605.00;

from _________ to __________: $______;

from _________ to __________: $______;

from _________ to __________: $______;

 

B.  First Full Month's Rent: The first base monthly rent payment is due on or before June 1. 2013

 

C.  Prorated Rent: If the Commencement Date is on a day other than the first day of a month, Tenant will pay Landlord as prorated rent an amount equal to the base monthly rent multiplied by the following fraction: the number of days from the Commencement Date to the first day of the following month divided by the number of days in the month in which this lease commences.

 

D.  Additional Rent: In addition to the base monthly rent and prorated rent, Tenant will pay Landlord all other amounts, as provided by the attached (Check all that apply.) :

 

[X]  (1)  Commercial Expense Reimbursement Addendum

[   ]  (2)  Commercial Percentage Rent Addendum

[   ]  (3) Commercial Parking Addendum

[   ]  (4)

 

All amounts payable under the applicable addenda are deemed to be "rent" for the purposes of this lease.

 

  

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Commercial Lease concerning:  Ideal Power Converters

 

E.  Place of Payment: Tenant will remit all amounts due Landlord under this lease to the following person at the place stated or to such other person or place as Landlord may later designate in writing:

 

Name:  Texas Public Employees Association

Addres:  512 East 11th Stree, Suite 100

         Austin, TX 78701

 

F.  Method of Payment: Tenant must  pay  all  rent timely  without  demand,  deduction,  or offset1 except as permitted  by law or this lease.  If Tenant fails to timely pay any amounts due under this lease or if any check of Tenant is returned to Landlord by the institution on which it was drawn, Landlord, after providing written notice to Tenant1 may require Tenant to pay subsequent amounts that become due under this lease in certified funds. This paragraph does not limit Landlord from seeking other remedies under this Lease  for Tenant's  failure  to  make  timely  payments  with  good funds.

 

G.  Late Charges:  If Landlord does not actually receive a rent payment at the designated place of payment within 5 days after the date it is due, Tenant will pay Landlord a late charge equal to 5% of the amount due. In this paragraph, the mailbox is not the agent for receipt for Landlord. The late charge is a cost associated with the collection of rent and Landlord's acceptance of a late charge does not waive Landlord's right to exercise remedies under Paragraph 20.

 

H.  Returned Checks: Tenant will pay $30.00 for each check Tenant renders to Landlord which is returned by the institution on which it is drawn for any reason 1 plus any late charges through the time Landlord receives payment.

 

5.  SECURITY DEPOSIT

 

A.  Upon execution of this lease, Tenant will pay$ 2266.00 to Landlord as an additional security deposit. Tenant has already paid to Landlord under the previous Lease contract, a security deposit in the amount of $11000.001 which will be retained by the Landlord as part of the initial security deposit for this Lease.

 

B. Landlord may apply the security deposit to any amounts owed by Tenant  under this lease.  If  Landlord  applies any part of the security deposit during any time this lease is in effect to amounts owed by Tenant, Tenant must, within 10 days after receipt  of notice from  Landlord,  restore the security deposit to the amount stated.

 

C. After Tenant surrenders the leased premises to Landlord and provides Landlord written notice of Tenant's forwarding address1 Landlord will, not later than the time required by §g3.005, Tex'?s Property Code, refund the security deposit less any amounts applied toward amounts owed by Tenant or other charges authorized by this lease. The parties agree that Landlord acts in good faith if Landlord accounts for the security deposit within the time stated.

 

6.       TAXES:

 

Unless otherwise agreed  by the parties,  Landlord  will  pay all  real  property  ad valorem  taxes assessed  against the leased premises.  Any assessment for taxes on the personal  property in the leased premises shall be the responsibility of Tenant.

 

  

-4-

  

 

7.  UTILITIES:

 

A.  The party designated below will pay for the following utility charges to the leased premises and any connection charges for the utilities. (Check all that apply.)

	
 

(1)   Water

(2)  Sewer

(3)   Electric

	
NA

[   ]

[   ]

[   ]

	
Landlord

[X]

[X]

[   ]

	
Tenant

[   ]

[   ]

[X]

	
(4) Gas

(5)  Telephone

	
[X]

[   ]

	
[   ]

[   ]

	
[   ]

[X]

	
(6) Trash

	
[   ]

	
[X]

	
[   ]

	
(7)  Cable

	
[X]

	
[   ]

	
[   ]

	
(8) High Speed Internet

	
[   ]

	
[   ]

	
[X]

	
(9) All other utilities

	
[   ]

	
[   ]

	
[X]

 

If, however,  activities of Tenant or any of its employees, customers, guests or invitees shalJ damage or impair appliances, service lines or other items appurtenant to any of the utilities or the provision of utility services, Tenant shall be liable for costs of repair or any other extraordinary expenses incurred as a result thereof. In such an event, Landlord will bill Tenant for such costs or expenses, and Tenant shall pay the amount due within thirty (30) days of receipt of the bill.

 

B.  The party responsible for the charges under Paragraph 7A will pay the charges directly to the utility service provider.

 

The responsible party may select the  utility service provider except that if Tenant selects the provider any access or alterations to the Property or leased premises necessary for the utilities may be made only  with  Landlord's  prior consent, which Landlord will not unreasonably withhold. If Landlord incurs  any  liability for utility  or connection charges for which Tenant is responsible to pay and Landlord  pays such amount, Tenant will immediately upon written notice from Landlord  reimburse Landlord such amount.

 

C. Notice: Tenant should determine if all necessary utilities are available to the lease premises and are adequate for Tenant's intended use.

 

8.  INSURANCE:

 

A.  During all times this lease is in effect, Tenant must, at Tenant's expense, maintain in full force and effect from an insurer authorized to operate  in Texas:

 

(1)  public liability insurance in an amount not less than $11000,000.00 on an occurrence basis naming Landlord as an additional insured; and

 

(2)   personal property damage insurance for Tenant's business operations and contents on the leased premises in an amount sufficient to replace such contents after a casualty loss.

 

B. Before the Commencement Date, Tenant must provide  Landlord  with a copy of the insurance certificates evidencing the required coverage. If the insurance coverage changes in any manner or degree at any time this lease is in effect, Tenant must, not  later than 10 days after the change, provide  Landlord  a copy of an insurance certificate evidencing the  change.

 

  

-5-

  

 

C.  If Tenant fails to maintain the required insurance in full force and effect at all times this lease is in effect, Landlord may:

 

(1)  purchase insurance that will provide Landlord the same coverage as the required insurance and Tenant must immediately reimburse Landlord for such expensei or

 

(2)   exercise Landlord's remedies under Paragraph 20.

 

D.  Unless the parties agree otherwise, Landlord will, at Landlord's expense, maintain in full force and effect insurance for fire and extended coverage in an amount to cover the reasonable replacement cost of the improvements of the Property and public liability insurance in an amount that Landlord determines reasonable and appropriate.

 

E.  If there is an increase in Landlord's insurance premiums for the leased premises or Property or its contents that is caused by Tenant, Tenant's use of the leased premises1 or any improvements made by or for Tenant 1 Tenant will1 for each year this lease is in effect, pay Landlord the increase immediately after Landlord notifies Tenant of the increase. Any charge to Tenant under this Paragraph 8D will be equal to the actual amount of the increase in Landlord's insurance premium.

 

9.  USE AND HOURS

 

A.  Tenant may use the leased premises for the following purpose and no other: Primary office and storage use

 

B.  Unless otherwise specified in this lease, Tenant will operate and conduct its business in the leased premises during business hours that are typical of the industry in which Tenant operates.

 

10.  LEGAL COMPLIANCE:

 

A.  Tenant may not use or permit any part of the leased premises to be used for:

 

(1)  any activity which is a nuisance or is offensive 1 noisy, or dangerous;

 

(2)  any activity that interferes with any other tenant's normal business operations or Landlord's management of the Property;

 

(3)  any activity that violates any applicable law1  regulation1 zoning ordinance, restrictive covenant, governmental order, owner's association rules, tenants' association rules, Landlord's rules or regulations, or this lease;

 

(4)  any hazardous activity that would require any insurance premium on the Property or leased premises to increase or that would void any such insurance;

 

(5)  any activity that violates any applicable federal, state, or local law, including but not limited to those laws related to  air  quality,  water  quality,  hazardous  materials1   wastewater,  waste  disposal1    air  emissions,  or  other environmental matters;

 

(6)  the permanent or temporary storage of any hazardous material; or

 

  

-6-

  

 

B. "Hazardous material' means any pollutant, toxic substance, hazardous waste, hazardous material, hazardous substance, solvent, or oil as defined by any federal1 state, or local environmental law, regulation, ordinance, or rule existing as of the date of this lease or later enacted.

 

C. Landlord does not represent or warrant that the leased premises or Property conform to applicable restrictions1 zoning ordinances, setback lines, parking requirements, impervious ground cover ratio requirements, and other matters that may relate to Tenant's intended use. Tenant must satisfy itself that the lease premises may be used as Tenant intends by independently investigating all matters related to the use of the leased premises or Property. Tenant agrees that it is not relying on any warranty or representation made by Landlord. Landlord's agent or any broker concerning the use of the leased premises or Property.

 

11.  SIGNS

 

A.  Tenant may not post or paint any signs at, on, or about the leased premises or Property without Landlord's written consent. Landlord  ay remove any unauthorized sign, and Tenant will promptly reimburse Landlord for its cost to remove any unauthorized sign.

 

B. Any authorized sign must comply with all laws, restrictions, zoning ordinances, and any governmental order relating to signs on the leased premises or Property. Landlord may temporarily remove any authorized sign to complete repairs or alterations to the leased premises or the Property.

 

C. By providing written notice to Tenant before this lease ends, Landlord may require Tenant, upon move-out and at Tenant's expense, to remove, without damage to the Property or leased premises, any or all signs that were placed on the Property or leased premises by or at the request of Tenant. Any signs that Landlord does not require Tenant to remove and that are fixtures, become the property of the Landlord and must be surrendered to Landlord at the time this lease ends.

 

1.2. ACCESS BY LANDLORD:

 

A.  During Tenant's normal business hours Landlord may enter the leased premises for any reasonable purpose, including but not limited to purposes for repairs, maintenance, alterations, and showing the leased premises to prospective tenants or purchasers. Landlord may access the leased premises after Tenant's normal business hours if: (1) entry is made with Tenant's permission; or (2) entry is necessary to  complete emergency repairs. Landlord may not unreasonably interfere with Tenant's business operations when accessing the lease premises.

 

B. During the last 60 leased premises days of this lease, Landlord may place a "For Lease" or similarly worded sign in or on the

 

13.  MOVE-IN CONDITION:

 

Tenant has inspected the leased premises and accepts it in its present (as-is) condition unless expressly noted otherwise in this lease. Landlord and any agent have made no express or implied warranties as to the condition or permitted use of the leased premises or Property.

 

  

-7-

  

 

14.  MOVE-OUT CONDITION AND FORFEITURE OFTENANT 1S PERSONAL PROPERTY:

 

A.  At the time this lease ends, Tenant will surrender the leased premises in the same condition as when received, except for normal wear and tear. Tenant will leave the leased premises in a clean condition free of all trash1 debris, personal property, hazardous materials, and environmental contaminants.

 

B.  If Tenant leaves any personal property in the leased premises after Tenant surrenders possession of the leased premises, Landlord may: (1) require Tenant, at Tenant's expense, to remove the personal property by providing written notice to Tenant; or (2) retain such personal property as forfeited property to Landlord.

 

C.  "Surrender" means vacating the leased premises and returning all keys and access devices to Landlord. "Normal wear and tear" means deterioration that occurs without negligence, carelessness 1 accident, or abuse.

 

D.  By providing written notice to Tenant before this lease ends,  Landlord may require Tenant 1  upon move-out and at Tenant's expense1 to remove, without damage to the Property or leased premises, any or all fixtures that were placed on the Property or leased premises by or at the request of Tenant. Any fixtures that Landlord does not require Tenant to remove become the property of the Landlord and must be surrendered to Landlord at the time this lease ends.

 

15.  MAINTENANCE AND REPAIRS:

 

A.  Cleaning: Tenant must keep the leased premises clean and sanitary and promptly dispose of all garbage in appropriate receptacles. Tenant will provide, at its expense, janitorial services to the leased premises that are customary and ordinary for the Property type.

 

B. Repairs of Conditions Caused by a Party: Each party must promptly repair a condition in need of repair that is caused, either intentionally or negligently, by that party or that party's guests, patrons, invitees, contractors or permitted subtenants. At its option, Landlord may make such repair and, if appropriate, bill Tenant therefor.

 

C. Repair and Maintenance Responsibility: Except as provided by Paragraph 1581 the party designated below, at its expense, is responsible to maintain and repair the following specified items in the leased premises. The specified items must be maintained in clean and good operable condition. If a governmental regulation or order requires a modification to any of the specified items, the party designated to maintain the item must complete  and pay the expense of the modification. The specified items include and relate only to real property in the leased premises. Tenant is responsible for the repair and maintenance of its personal property. (Check all that apply.)

 

	 	NA	Landlord	Tenant
	(1) Foundation, exterior walls, roof, and other structural components	[   ]	[X]	[   ]
	(2) Glass and windows	[   ]	[X]	[   ]
	(3) Fire proctection equipment and fire sprinkler systems	[   ]	[   ]	[X]
	(4) Exterior & overhead doors, including closure devices, molding locks, and hardware	[   ]	[X]	[   ]
	(5) Grounds maintenance, including landscaping and ground sprinklers	[   ]	[X]	[   ]
	(6) Interior doors, including closure devices, frames, molding, locks, and hardware	[   ]	[X]	[   ]
	(7) Parking areas and walks	[   ]	[X]	[   ]
	(8) Plumbing systems, drainage systems, electrical systems, ballast and lamp replacement, and mechanical systems, except those specifically designated otherwise	
 

[   ]

	
 

[X]

	
 

[   ]

	(9) Heating Ventilation and Air Conditioning (HVAC) systems	[   ]	[X]	[   ]
	(10) Signs and lighting:	 	 	 
	    (a) Pylon	[X]	[   ]	[   ]
	    (b) Facia	[X]	[   ]	[   ]
	    (c) Monument	[X]	[   ]	[   ]
	    (d) Door/Suite	[X]	[   ]	[   ]
	(11) Extermination and pest control, excluding wood-destroying insects	[   ]	[   ]	[   ]
	(12) Storage yards and storage buildings	[   ]	[X]	[   ]
	(13) Wood-destroying insect treatment and repairs	[X]	[   ]	[   ]
	(14) Cranes and related systems	[   ]	[X]	[   ]
	(15) All other items and systems	[X]	[   ]	[   ]

  

-8-

  

 

D.  Repair Persons: Repairs must be completed  by trained, qualified, and insured repair persons.

 

E.  HVAC Service Contract: If Tenant maintains the HVAC system under Paragraph  15((9), Tenant [   ] is [X] is  not required to maintain, at  its expense, a regularly  scheduled  maintenance  and  service  contract for the  HVAC system. The maintenance and service contract must be purchased from a HVAC  maintenance  company  that  regularly provides such contracts to similar properties.   If Tenant fails to maintain  a required  HVAC maintenance  and service, contract in effect at all times during this lease, landlord may do so and charge Tenant the expense of such a maintenance and service contract or exercise Landlord's remedies under Paragraph 20.

 

F.  Common Areas: Landlord will  maintain  any common areas in the Property in a manner as Landlord determines to be in the best interest of the Property. landlord may change the size, dimension, and location of any common  areas, provided that such change does not materially impair Tenant's use and access to the leased premises. Tenant has the non-exclusive license to use the common areas ih compliance with Landlord's rules and restrictions. Tenant may not solicit any business in the common areas or interfere with any other person's right to use the common areas. This paragraph  does not apply if Paragraph  2A(2) applies.

 

G.  Notice of Repairs: Tenant must promptly notify Landlord of any item that is in need of repair and that is Landlord's responsibility to repair.  All requests for repairs to Landlord  must be in writing.  With respect to repairs to the interior of the leased premises, Tenant shall be responsible and pay (1) all of the cost of such repairs due to damage caused by Tenant or Tenant's employees, guests or invitees, or (2) up to a maximum of One Hundred Dollars ($100.00) for any other type of repairs. Repairs costs described in (2) and in excess of the first $100.00  of  cost  shall  be  the responsibility of and paid by Landlord. Where both Tenant and Landlord are responsible for portions of the costs of repair, Tenant shall remit its $10o.oo share of the costs with the notification to Landlord provided above.  Landlord shall have no duty to begin making any such repairs, until Tenant has remitted its $ioo.oo share of the costs to be extended.

 

H.  Failure to Repair: Landlord must commence efforts to make a repair for which Landlord is responsible within 20 days after Tenant provides Landlord written notice of the needed repair or maintenance. If Tenant fails to repair or maintain  an item for which  Tenant  is responsible  within  10 days after Landlord  provides Tenant written notice of the needed repair or maintenance, Landlord may: (i) repair or maintain the item, without liability for any damage or loss to Tenant, and Tenant must immediately reimburse Landlord for the cost to repair or maintain or (ii) exercise Landlord's remedies under Paragraph 20.

 

  

-9-

  

 

16.  ALTERATIONS:

 

A.  Tenant may not alter, improve, or add to the Property or the leased premises without Landlord's written consent.

 

Landlord will not unreasonably  withhold  consent for the Tenant to make reasonable  non-structural alterations, modifications, or improvements to the leased premises.

 

B.  Tenant may not alter any locks or any security devices on the Property or the leased premises without Landlord's consent. If Landlord authorizes the changing, addition, or re-keying of any locks or other security devices, Tenant must immediately provide a set of the new keys and any access devices to Landlord.

 

C.  If a governmental order requires alteration or modification to the leased premises, the party obligated to maintain and repair the item to be modified or altered as designated in Paragraph 15 will, at its expense, modify or alter the item in compliance with the order.                                                                                    ·

 

D.  Any alterations, improvements, fixtures or additions to the Property or leased premises installed by either party during the term of this lease will become Landlord's property and must be surrendered to Landlord at the time this lease  ends, except for those fixtures Landlord requires Tenant to remove under Paragraph 11 or 14 or if the parties agree otherwise in writing.

 

17.  LIENS:

 

Tenant may not do anything that will cause the title of the Property or leased premises to be encumbered in any way. If Tenant causes a lien to be filed against the Property or leased premises, Tenant will within 20 days after receipt of Landlord's demand: (1) pay the lien and have the lien released of recordi or (2) take action to discharge the lien. Tenant will provide Landlord a copy of any release Tenant obtains pursuant to this paragraph.

 

18.  LIABILITY:

 

To the extent permitted by law, Landlord is NOT responsible to Tenant or Tenant's employees. patrons, guests, or invitees for any damages injuries, or losses to person or property caused by:

 

A.  an  act,  omission,  or  neglect  of: Tenant;  Tenant's  agent; Tenant's  guest;  Tenant's  employees;  Tenant's  patrons; Tenant's invitees or any other tenant on the Property;

 

B.  fire, flood,  water leaks, ice. snow, hail, winds, explosion, smoke, riot, strike, interrnption of utilities, theft, burglary, robbery, assault, vandalism, other persons, environmental contaminants, other occurrences or casualty losses or any other incident which would fall into the category of ''Acts of God."

 

  

-10-

  

 

19.  INDEMNITY:

 

Each party will indemnify and hold the other party harmless from any property damage, personal injury suits, actions, liabilities, damages, cost of repairs or service to the leased premises or Property or any other loss, caused, negligently or otherwise, by that party or that party's employees, patrons, guests, or invitees.

 

20.  DEFAULT:

 

A.  If Landlord fails to  comply  with  this  lease  within  30  days  after  Tenant  notifies  Landlord  of  Landlord's  failure  to comply1 Landlord will be in default  and  Tenant  may  cancel  this  Lease  Agreement.  If  however,  Landlord's  non­ compliance reasonably requires more than 30 days to  cure,  Landlord  will  not  be  in  default  if  the  cure  is  commenced within  the  30-day  period  and  is diligently  pursued.

 

B.  If Landlord does not actually receive at the place designated for payment any rent due under this lease withins days after it is due, Tenant will  be in default. If Tenant fails to comply with this lease for any other reason within 15 days after Landlord notifies Tenant of its failure to comply, Tenant will be in default.

 

C.  If Tenant is in default, Landlord may: (i) terminate Tenant's right to occupy the leased premises by providing Tenant with at leasts days written noticei and (ii) accelerate all rents which  are payable during the remainder  of this lease or any renewal period without notice or demand. Landlord, at its option1 may attempt to mitigate any damage or loss caused by Tenant's breach by using commercially reasonable means.  If Tenant is in default, Tenant will be liable for:

 

(1)  any lost rent

 

(2) Landlord's cost of re-letting the leased premises, including  brokerage fees1  advertising fees, and other fees necessary to re-let the leased premises;

 

(3)  repairs to the leased premises for use beyond normal wear and teari

 

(4)  all Landlord's costs associated with eviction of Tenant1 such as attorney's fees, court costs, and prejudgment interest;

 

(5)  all Landlord's costs associated with collection of rent such as collection fees,  late charges, and returned check charges;

 

(6)  cost of removing any of Tenant's equipment or fixtures left on the leased premises or Property;

 

(7) cost to remove any trash, debris, personal property, hazardous materials, or environmental contaminants left by Tenants or Tenant's employees, patrons, guests, or invitees in the leased premises or Property;

 

(8)  cost to replace any unreturned keys or access devices to the le·ased premises, parking areas, or Property;

 

(9)  any other recovery to which  Landlord  may be entitled under this lease or under law.

 

21.  ABANDONMENT, INTERRUPTION OF UTILITIES, REMOVAL OF PROPERTY, AND LOCKOUT:

 

Chapter 93 of the Texas Property Code governs the rights and obligations of the parties with regard to: (a) abandonment of the leased premises; (b) interruption of utilitiesi (c) removal of Tenant's propertyi and (d) "lock-out 11 of Tenant.

 

  

-11-

  

 

22.  HOLDOVER:

 

If Tenant fails to vacate the leased premises at the time this lease ends, Tenant will become  a tenant-at-will  and  must vacate the leased premises immediately upon receipt of demand from Landlord.  No  holding  over  by  Tenant, with  or without the consent of Landlord, will  extend this lease.  Tenant will  indemnify  Landlord  and any prospective  tenants for any and all damages caused by the  holdover. Rent for any  holdover  period  will  be  2  times the  base  monthly  rent  plus any additional  rent calculated  on a daily basis and will  be immediately due and payable daily without notice or demand.

 

23.  LANDLORD'S LIEN AND SECURITY INTEREST:

 

To secure Tenant 1s performance under this lease, Tenant grants to Landlord a lien and security interest against all of Tenant 1s nonexempt personal property that is in the leased premises or Property. This lease is a security agreement for the purposes of the Uniform Commercial Code. Landlord may file a copy of this lease as a financing statement.

 

24.  ASSIGNMENT AND SUBLETTING:

 

Landlord may assign this lease to any subsequent owner of the Property. After six months, Tenant may assign this lease or sublet any part of the leased premises so long as Landlord has consented to such assignment or subletting in writing before it occurs. The decision whether to consent to such subletting shall be at Landlord 1s sole discretion.         ·

 

25.  RELOCATION:

 

[   ]  A.  By providing Tenant with not less than 90 days advanced written notice, Landlord may require Tenant to relocate to another location in the Property, provided that the other location is equal in size or larger than the leased premises then occupied by Tenant and contains similar leasehold improvements. Landlord will pay Tenant's reasonable out-of­ pocket moving expenses for moving to the other location. "Moving expenses" means reasonable expenses payable to professional movers, utility companies for connection and disconnection h es, wiring companies for connecting and disconnecting Tenant's office equipment required by the relocation, and printing companies for reprinting Tenant's stationary and business cards. A relocation of Tenant will not change or affect any other provision of this lease that is then in effect, including rent and reimbursement amounts, except that the description of the suite or unit number will automatically be amended.

 

[X]   B.  Landlord  may not require Tenant to relocate to another location  in the Property without Tenant's prior consent.

 

  

-12-

  

 

26.  SUBORDINATION:

 

A.  This lease and Tenant's leasehold interest are and will be subject, subordinate, and inferior to:

 

(1)  any lien, encumbrance,  or ground  lease now or hereafter placed on the leased  premises or the Property that Landlord authorizes;

 

(2)  all advances made under any such lien, encumbrance, or ground lease;

 

(3)  the interest payable on any such lien or encumbrance;

 

(4)  any and all renewals and extensions of any such lien, encumbrance, or ground leasei

 

(5)  any restrictive covenant affecting the leased premises or the Property; and

 

(6)  the rights of any owners' association affecting the leased premises or Property.

 

B.  Tenant must, on demand  by  Landlord,  execute  a  subordination,  attornment,  and  non-disturbance  agreement, provided that such agreement is  made on the condition that this lease and Tenant's rights under this  lease are recognized by the lien-holder.

 

27.  ESTOPPEL  CERTIFICATES:

 

Within 10 days after receipt of a written request from Landlord, Tenant will execute and deliver to Landlord an estoppel certificate that identifies:

 

A.  any breach ofthe leasei

 

B.  the then current rent payment and rent schedule;

 

C.  the date the next rent payment is due;

 

D.  any advance rent payments;

 

E.  the amount of the security deposit;

 

F.  any claims for any offsetsi

 

G.  the then current term of the lease;

 

H.  any renewal options;

 

I.  Tenant's  possession  ·and acceptance  of the  leased  premises  and  improvements;

 

J.  any ownership interest by Tenant; and                                                                   ·

 

K.  any other information reasonably requested in the certificate.

 

28.  CASUALTY LOSS:

 

A.  Tenant must immediately notify Landlord of any casualty loss in the  leased  premises.  Within  20  days after  receipt  of Tenant's notice of a casualty loss, Landlord will notify Tenant if the leased premises  are  less than  or  more  than  50% unusable,  on a  per  square foot basis, and if Landlord can substantially  restore  the  leased  premises  within  120 days.

 

B.  If the leased premises are less than  50% unusable  and  Landlord  can substantially  restore the leased  premises within 120 days after Landlord responds to Tenant's notice of the casualty, Landlord will restore the leased premises to substantially the same condition as before the casualty. If Landlord fails to substantially  restore  within  the  time required,  Tenant  may terminate this lease.

 

  

-13-

  

 

C. If the leased premises are more than 50% unusable and Landlord can substantially restore the leased premises within 120 days after Tenant notifies Landlord of the casualty, Landlord may: (1) terminate this lease; or (2) restore the leased premises to substantially the same condition as before the casualty. If Landlord chooses to restore and does not substantially restore the leased premises within the time required, Tenant may terminate this lease.

 

D.  If Landlord notifies Tenant that Landlord cannot substantially restore the leased premises within 120 days after Tenant notifies Landlord of the casualty loss, Landlord may: (1) choose not to restore and terminate this leasei or (2) choose to restore, notify Tenant of the estimated time to restore, and give Tenant the option to terminate this lease

by notifying Landlord within io days.

 

E.  If this lease does not terminate because of a casualty loss, rent will be reduced from the date Tenant notifies Landlord of the casualty loss to the date the leased premises are substantially restored by an amount proportionate to the extent the leased premises are unusable.

 

29. CONDEMNATION:

 

If after a condemnation or purchase in lieu of condemnation the leased premises are totally unusable for the purposes stated in this lease, this lease will terminate. If after a condemnation or purchase in lieu of condemnation the leased premises or Property is partially unusable for the purposes of this lease, this lease wil I continue and rent will be reduced in an amount proportionate to the extent the leased premises are unusable. Any condemnation award or proceeds in lieu of condemnation are the property of Landlord and Tenant has no claim to such proceeds or award. Tenant may seek compensation form the condemning authority for its moving expenses and damages to Tenant's personal property.

 

30. ATTORNEY'S FEES:

 

Any person who is a prevailing party in any legal proceeding brought under or related to the transaction described in this lease is entitled to recover prejudgment interest, reasonable attorney's fees, and all other costs of litigation from the non-prevailing party.

 

31.      REPRESENTATIONS:

 

Tenant's statements in this lease and any application for rental are material representations relied upon by Landlord. Each party signing this lease represents that he or she is of legal age to enter into a binding contract and is authorized to sign the lease. If Tenant makes any misrepresentation in this lease or in any application for rental, Tenant is in default. Landlord is not aware of any material defect on the Property that would affect the health and safety of an ordinary person or any environmental hazard on or affecting the Property that would affect the health or safety of an ordinary person, except: NA 

 

  

-14-

  

 

32.  BROKERS:

 

A.  The brokers to this lease are:

 

N/A

 

[X]  or  there are no brokers involved in this lease transaction

 

Cooperating Broker:  _______________________________­

 

License No.:  ___________________________________

 

Address:  ___________________________________

 

Phone:  ___________________________________

 

Fax:  ___________________________________

 

E-mail:  ___________________________________

 

Cooperating Broker represents Tenant.

 

Principal Broker:  ___________________________________

 

License No.:  ___________________________________

 

Address:  ___________________________________

 

Phone:  ___________________________________

 

E-mail:  ___________________________________

 

(Circle one only)

 

represents Landlord only

 

represents Tenant only.

 

is an intermediary between Landlord and Te·nant.

 

  

-15-

  

 

/B.  Fees (if any or applicable):

 

(1)  Principal Broker's fee will be paid according to: (Check only one box).

 

[   ]   (a)   a separate written commission agreement between Principal Broker and:

 

[   ] Landlord                              [   ] Tenant.

 

[   ]   (b)  the attached Addendum for Broker's Fee.

 

(2)   Cooperating Broker's fee will be paid according to: (Check only one box).

 

[   ] (a)          a separate written commission agreement between Cooperating Broker and:

 

[   ] Principal Broker                                  [   ] Landlord                           [   ] Tenant.

 

[   ]  (b) the attached Addendum for Broker's Fee.

 

33.  ADDENDA:

 

Incorporated into this lease are the addenda 1 exhibits and other information marked in the Addenda and Exhibit section of the Table of Contents. If Landlord's Rules and Regulations are made part of this lease, Tenant agrees to comply with the Rules and Regulations as Landlord may 1 at its discretion, amend from time to time. Any and all such are a part of this lease for all purposes and are applicable to the parties hereto.

 

34.  NOTICES:

 

All notices under this lease must be in writing and are effective when hand-delivered, sent by mail, or sent by facsimile transmission to:

 

IF TO TENANT:

 

IDEAL POWER CONVERTERS

5004 Bee Creek Road, Suite 600

Spicewood, Texas 78669

 

IF TO LANDLORD:

 

TEXAS PUBLIC EMPLOYEES ASSOCIATION

512 East 11th Street, Suite 100

Austin, Texas 78701

 

  

-16-

  

35.  SPECIAL PROVISIONS:

 

 

36.  AGREEMENT OF PARTIES:

 

A.  Entire Agreement: This lease contains the entire agreement between Landlord and Tenant and may not be changed except by written agreement.

 

B.  Binding Effect: This lease is binding upon and inures to the benefit of the parties and their respective heirs1 executors, administrators, successors, and permitted assigns, to the extent any successors or assigns are permitted herein .

 

C.  Joint and Several: All Tenants are jointly and severally liable for all provisions of this lease. Any act or notice to, or refund to, or signature of, any  one or more of the Tenants regarding any term of this lease, its renewal, or its termination is binding on all Tenants.

 

D.  Controlling Law: The laws of the State of Texas govern the interpretation, performance, and enforcement of this lease. Venue for any dispute shall be in Travis County, Texas.

 

E.  Severable Clauses: If any clause in this lease is found invalid or unenforceable by a court of law, the remainder of this lease will not be affected and all other provisions of this lease will remain valid and enforceable.

 

F.  Waiver: Landlord's delay, waiver, or non-enforcement of acceleration, contractual or statutory lien, rental due date, or any other right will not be deemed a waiver of any other or subsequent breach by Tenant or any other term in this lease.

 

G.  Quiet Enjoyment: Provided that Tenant is not in default of this lease, Landlord covenants that Tenant will enjoy possession and use of the leased premises free from material interference.

 

H.  Force Majeure: If Landlord's performance of a term in this lease is delayed by strike, lock-out, shortage of material, governmental restriction, riot, flood, or any cause outside Landlord's control, the time for Landlord's performance will be abated until after the delay.

 

I.  Time: Time is of the essence.  The parties require strict compliance with the times for performance.

 

  

-17-

 

  

 

Brokers are not qualified to render legal advice, property inspections,  surveys,  engineering  studies, environmental assessments, tax advice, or compliance inspections. The parties should seek experts to render such services.  READ THIS LEASE CAREFULLY.  If you do not understand the effect of this Lease, CONSULT YOUR ATTORNEY BEFORE SIGNING.

 

	
IDEAL POWER CONVERTERS

Tenant

 

By:  /s/ Christopher P. Cobb

Date:  4/29/2013

Printed Name:  Christopher P. Cobb

Title:  President

	
TEXAS PUBLIC EMPLOYEES ASSOCIATION

Landlord

 

By:  /s/ Gary W. Anderson

Date:  5/7/2013

PrintedName:  Gary W. Anderson

Title:  Executive Director

	 	 
	
 

/s/ Paul Bundschuh

Tenant

 

Printed Name:  Paul Bundschuh

Title:  CEO

	
_______________

Landlord

 

By:  ___________________

Printed Name:  _______________

Title:  _______________________

 

  

-18-

  

 

COMMERCIAL LEASE EXPENSE REIMBURSEMENT ADDENDUM.

 

ADDENDUM TO THE COMMERCIAL LEASE BETWEEN THE UNDERSIGNED PARTIES CONCERNING THE LEASED PREMISES AT

 

IDEAL POWER CONVERTERS, 5004 BEE CREEK ROAD, SUITES 600 AND 620, 5PICEWOOD 1 TEXAS 78669

 

In addition to rent stated in the lease, Tenant will pay Landlord the additional rent described in this addendum. Tenant will pay the additional rent each month at the time the base-monthly rent in the lease is due.

 

A.  Definitions:

 

(1)  "Tenant's pro rata share" is 18.4%

 

(2) "CAM" means all of Landlord's expenses reaspnably incurred to maintain, repair, operate, manage, and secure the Property (for example, security, lighting, painting, cleaning, decorations utilities, trash removal, pest control, promotional expenses, and other expenses reasonably related to the Property's operations) CAM does not include capital expenditure , interest, depreciation, tenant improvements, insurance, taxes, or brokers' leasing fees (i.e., all operating expenses except taxes and insurance).

 

(3)  "Insurance" means Landland's costs to insure the leased premises and the Property including but not limited to insurance for casualty loss, general liability, and reasonable rent loss.

 

(4)  "Taxes" means the real property ad valorem taxes assessed against the leased premises and Property inclusive of, all general and special assessments and surcharges.

 

B. Method: The additional rent will be calculated under the following method:

 

Note:  "Cam" means operating expenses except taxes and insurances

 

(1). Net:                   Each month Tenant will pay Tenant's pro rata share of the projected monthly expense for the Property for: [X] taxes; [X] insurance; and [X] CAM.

 

C.  Projected Monthly Expenses: On or about December 31 of each calendar year, Landlord will project the applicable monthly expenses (those that Tenant is to pay under this addendum) for the following calendar year and will notify Tenant of the projected expenses. The projected expenses are based on Landlord's estimates of such expenses. The actual expenses may vary.

 

Notice:  The applicable projected annual expenses for the calendar year in which the above-referenced lease commences  is $1.99 per square foot. The total rentable area of the Property presently used by Landlor.d for calculating expense reimbursement is 20,400 square feet.

 

  

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D.  Reconciliation: Within a reasonable time after the end of each calendar year, Landlord will notify Tenant of the actual costs of the applicable expenses (those that Tenant is to pay under this addendum) for the previous year. If the actual costs of the applicable expenses exceed the amounts paid or owed by Tenant for the previous year, Tenant must pay the deficient amount to Landlord within 15 days after Landlord notifies Tenant of the deficient amount. If the actual costs of the applicable expenses are less than the amounts paid by Tenant for the previous year, Landlord will refund the excess to Tenant or will credit the excess to Tenant's next rent payment. Tenant may audit or examine those items in Landlord's records that relate to Tenant's obligations under this addendum.

 

Additional Rent to be paid by Tenant will be $661.00 per month.

 

	
IDEAL POWER CONVERTERS

Tenant

 

By:  /s/ Christopher P. Cobb

Printed Name:  Christopher P. Cobb

Title:  President

	
TEXAS PUBLIC EMPLOYEES ASSOCIATION

Landlord

 

By:  /s/ Gary W. Anderson

Printed Name:  Gary W. Anderson

Title:  Executive Director

 

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