Document:

Exhibit 4.1

Exhibit 4.1

		
	 
	State of Delaware

	 
	Secretary of State

	 
	Division of Corporations

	 
	Delivered 04:09 PM 11/05/2013

	 
	FILED 04:07 PM 11/05/2013

	 
	SRV 131273500 – 3414073 FILE

POSITIVEID CORPORATION

AMENDED CERTIFICATE OF DESIGNATIONS OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES I CONVERTIBLE PREFERRED STOCK

The undersigned, William J. Caragol and Allison F. Tomek,

here

by certify that:

1.

They are the Chief Executive Officer and Secretary, respectively, of PositiveID Corporation

, a Delaware

 corporation (the “Corporation”).

2.

The Corporation is authorized to issue 5,000,000 shares of preferred stock, of which 650 are currently designated, issued and outstanding.  

3.

The following resolutions were duly adopted by the Board of Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of 5,000,000 shares of $0.001 par value preferred stock (the “Preferred Stock”), issuable from time to time in one or more series;
WHEREAS, the Board of Directors of the Corporation is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of

Preferred Stock

 and the number of shares constituting any series and the designation thereof, of any of them; 
WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid in accordance with Section 151 of the General Corporation Law of the State of Delaware, and as set forth in this Certificate of Designations of Preferences, Rights and Limitations of Series I Convertible Preferred Stock, to designate the rights, preferences, restrictions and other matters relating to the Series I Convertible Preferred Stock, which will consist of 1,000 shares of Preferred Stock, par value $0.001 per share, which the Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of

Preferred Stock

 for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of

Preferred Stock

 as follows:
I.

Terms of Preferred Stock.

A.

Designation and Amount.  The series of

Preferred Stock

 will be designated as the Corporation’s Series I Convertible Preferred Stock (the “Series I Preferred Stock”) and the number of shares so designated will be 1,000, which will not be subject to increase without the consent of the holders (each a “Holder” and collectively, the “Holders”) of a majority of the outstanding shares of Series I Preferred Stock. 

B.

Ranking and Voting.  

1.

Ranking.

  

The Series I Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Corporation’s Common Stock (“Common Stock”); (b) junior with respect to dividends and right of liquidation with the Corporation’s Series F Preferred Stock; and (c) junior to all existing and future indebtedness of the Corporation.  Without the prior written consent of Holders holding a majority of the outstanding shares of Series I Preferred Stock, the Company may not issue any Preferred Stock that is not junior to the Series I Preferred Stock in right of dividends and liquidation.  

2.

Voting.  Each share of Series I Preferred Stock shall be entitled to vote on all matters requiring shareholder vote.  Each share of Series I Preferred Stock will be entitled to the number of votes per share based on the calculation of As Converted Voting Shares, as defined in Section I.G.5.a, calculated on any record date for any shareholder vote.

C.

Dividends.  

1.

Commencing on the date of the issuance of such shares of Series I Preferred Stock (each respectively an “Issuance Date”), Holders of Series I Preferred Stock will be entitled to dividends on each outstanding share of Series I Preferred Stock (“Dividends”), at a rate equal to 6.0% per annum (“Dividend Rate”) of a stated value  (“Stated Value”) of $1,000 per share of Series I Preferred Stock, subject to appropriate adjustment in the event of any stock splits, stock dividends, combinations of shares, recapitalizations or other such events relating to the outstanding Series I Preferred Stock at any time and from time to time

..  Dividends will accrue monthly and will be added to the Series I Liquidation Value, and upon redemption of the Series I Preferred Stock in accordance with

Section I.F

..  

Any calculation of the amount of such Dividends payable pursuant to the provisions of this Section I.C. will be made based on a 365-day year, compounded monthly

..   

2.

So long as any shares of Series I Preferred Stock are outstanding, no dividends or other distributions will be paid, declared or set apart with respect to any Common Stock.    

D.

Protective Provision.  So long as any shares of Series I Preferred Stock are outstanding, the Corporation will not, without the affirmative approval of the Holders of a majority of the shares of Series I Preferred Stock then outstanding (voting as a class), (i) alter or change adversely the powers, preferences or rights given to the Series I Preferred Stock or alter or amend this Certificate of Designations, (ii) authorize or create any class of stock ranking as to distribution of dividends senior to the Series I Preferred Stock, (iii) amend its articles

of incorporation or other charter documents

 in breach of any of the provisions hereof, (iv) increase the authorized number of shares of Series I Preferred Stock, (v) liquidate, dissolve or wind-up the business and affairs of the Corporation, or effect any Deemed Liquidation Event (as defined below)

, or (vi) enter into any agreement with respect to any of the foregoing.

1.

A “

Deemed Liquidation Event

” will mean:  (a) a merger or consolidation in which the Corporation is a constituent party or a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly-owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

2.

The Corporation will not have the power to effect a Deemed Liquidation Event referred to in

Section I.D.1

 unless the agreement or plan of merger or consolidation for such transaction provides that the consideration payable to the stockholders of the Corporation will be allocated among the holders of capital stock of the Corporation in accordance with

Section I.E

..

E.

Liquidation.

1.

Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of debts and other liabilities of the Corporation, and after payment or provision for any liquidation preference payable to the holders of any Preferred Stock ranking senior upon liquidation to the Series I Preferred Stock, but prior to any distribution or payment made to the holders of Common Stock or the holders of any Preferred Stock ranking junior upon liquidation to the Series I Preferred Stock by reason of their ownership thereof, the Holders of Series I Preferred Stock will be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount with respect to each share of Series I Preferred Stock equal to the Stated Value thereof plus any accrued but unpaid

Dividends

 thereon (collectively, the “Series I

 Liquidation Value

”).

2.

If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation will be insufficient to make payment in full to all Holders, then such assets will be distributed among the Holders at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled.

2

F.

Redemption.

1.

Corporation’s Redemption Option.  At any time after one year from the Issuance Date and subject to a ten day advance notice (via email or overnight courier) to the Holders, the Corporation will have the right, at the Corporation’s option, to redeem all or any portion of the shares of Series I Preferred Stock at a price per share equal to 100% of the Series I Liquidation Value of the shares being redeemed.  After the initial notice is delivered to the Holders, during the ten day notice period, Holders will have the right to convert pursuant to Section I.G.

2.

Mandatory Redemption.  If the Corporation determines to liquidate, dissolve or wind-up its business and affairs, or effect any Deemed Liquidation Event, the Corporation will redeem all of the outstanding shares of Series I Preferred Stock prior to the Deemed Liquidation Event.  All Series I Preferred Shares shall be redeemed no later than three years after their issuance.     

3.

Mechanics of Redemption.  If the Corporation elects to redeem any of the Holders’ Series I Preferred Stock then outstanding, it will deliver written notice thereof via email or overnight courier (“Notice of Redemption at Option of Corporation”) to each Holder whose shares are to be redeemed, which Notice of Redemption at Option of Corporation will indicate (a) the number of shares of Series I Preferred Stock that the Corporation is electing to redeem, (b) the date upon which the applicable redemption price will be paid, and (c) the amount of the applicable redemption price (with a reasonably detailed calculation thereof).  The Notice of Redemption at Option of Corporation may not be delivered until at least ten days after notice is delivered to Holder pursuant to Section I.F.1.  Upon receipt of such initial notice, the Holder will have the right to convert its Series I Preferred Shares into common shares pursuant to Section I.G.

4.

Payment of Redemption Price.  Upon receipt by any Holder of a Notice of Redemption at Option of Corporation, if Holder does not choose to convert pursuant to Section I.G, such Holder will promptly submit to the Corporation such Holder’s Series I Preferred Stock certificates.  Upon receipt of such Holder’s Series I Preferred Stock certificates, the Corporation will pay the applicable redemption price to such Holder in cash. 

G.

Conversion.

1.

Mechanics of Conversion.

a.

Subject to the terms and conditions hereof, any or all of the outstanding shares of Series I Preferred Stock may be converted into shares of Common Stock at any time or times after the Issuance Date, at the option of Holder, (i) if at the option of a Holder, by delivery of a written notice to the Corporation (the “Holder Conversion Notice”), of the Holder’s election to convert Series I Preferred Stock and the number of shares of Series I Preferred Stock which such Holder is electing to convert, or (ii) if at the option of the Corporation, if and only if the closing price of the Common Stock on the Trading Market exceeds 400% of the Conversion Price for a period of twenty consecutive trading days, by delivery of a written notice to the subject Holder (the “Corporation Conversion Notice” and, with the Holder Conversion Notice, each a “Conversion Notice”), stating the Corporation’s election to convert Series I Preferred Stock and the number of such Holder’s shares of Series I Preferred Stock to be converted.  

b.

Within one day of the Corporation Conversion Notice or Holder Conversion Notice, the Corporation shall transmit by facsimile or electronic mail an acknowledgment of confirmation of receipt of the Holder Conversion Notice or issuance of the Corporation Conversion Notice to the Holder.  Within three days of notice the Corporation shall issue a certificate for the number of shares specified in the Holder Conversion Notice or Corporation Conversion Notice. 

2.

Payment and Issuance Upon Conversion.  In the event of a conversion of any Series I Preferred Stock, the Corporation shall issue to such Holder a number of Conversion Shares equal to (i) the Series I Liquidation Value multiplied by (ii) the number of shares of Series I Preferred Stock held by such Holder and subject to the Holder Conversion Notice, divided by (iii) the Conversion Price with respect to such Series I Preferred Stock.

3.

Stock Splits.  If the Corporation at any time and from time to time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Conversion Shares will be proportionately increased.  If the Corporation at any time and from time to time on or after the first Issuance Date combines (by combination, reverse stock split, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased and the number of Conversion Shares will be proportionately decreased. Any adjustment under this Section I.G.3 shall become effective at the close of business on the date the subdivision or combination becomes effective.

3

4.

Rights.  In addition to any adjustments pursuant to Section I.G.3, if at any time the Corporation grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which Holder could have acquired if Holder had held the number of shares of Common Stock acquirable upon conversion of all Preferred Stock held by Holder immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

5.

Definitions.  For purposes of this Section I, the following terms shall have the following meanings:

a.

“As Converted Voting Shares” means the number of votes per share of Series I Preferred Stock calculated as pursuant to the following formula:  Number of votes per Series I share = Series I Liquidation Value per share, divided by the Conversion Price, multiplied by twenty-five (25).

b.

“Conversion Price” means a price per share of Common Stock equal to 100% of the closing bid price of the Common Stock on the Issuance Date, subject to adjustment as otherwise provided herein. 

c.

“Conversion Shares” means shares of Common Stock issuable upon conversion of Series I Preferred Stock.

d.

“Trading Day” means any day on which the Common Stock is traded on the Trading Market; provided that it shall not include any day on which the Common Stock is (i) scheduled to trade for less than 5 hours, or (ii) suspended from trading.

e.

“Trading Market” means the OTC Bulletin Board, the OTCQB, the OTC Pink Sheets, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.  All Trading Market data shall be measured as provided by the appropriate function of the Bloomberg Professional service of Bloomberg Financial Markets or its successor performing similar functions.

f.

“Transaction Documents” means, collectively, any Stock Purchase Agreement pursuant to which any share of Series I Preferred Stock is issued, and all other agreements, certificates and documents referenced therein or annexed thereto.

H.

Stock Register. The Corporation will keep at its principal office, or at the offices of the transfer agent, a register of the Series I Preferred Stock, which shall be prima facie indicia of ownership of all outstanding shares of Series I Preferred Stock.  Upon the surrender of any certificate representing Series I Preferred Stock at such place, the Corporation, at the request of the record Holder of such certificate, will execute and deliver (at the Corporations expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate.  Each such new certificate will be registered in such name and will represent such number of shares as is requested by the Holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.

II.

Miscellaneous.

A.

Notices.  Any and all notices to the Corporation will be addressed to the Corporation’s Chief Executive Officer at the Corporation’s principal place of business on file with the Secretary of State of the State of

Delaware

..  Any and all notices or other communications or deliveries to be provided by the Corporation to any Holder hereunder will be in writing and delivered personally, by electronic mail or facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Corporation, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder will be deemed given and effective on the earliest of (1) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section II.A prior to 5:30 p.m. Eastern time, (2) the first business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this section later than 5:30 p.m. but prior to 11:59 p.m. Eastern time on such date, (3) the second business day following the date of mailing, if sent by nationally recognized overnight courier service, or (4) upon actual receipt by the party to whom such notice is required to be given.

4

B.

Lost or Mutilated Preferred Stock Certificate.  Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered Holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series I Preferred Stock, and in the case of any such loss, theft or destruction upon receipt of indemnity reasonably satisfactory to the Corporation

(provided that if the Holder is a financial institution or other institutional investor its own agreement will be satisfactory)

or in the case of any such mutilation upon surrender of such certificate, the Corporation will, at its expense, execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

C.

Headings.  The headings contained herein are for convenience only and will not be deemed to limit or affect any of the provisions hereof.

RESOLVED, FURTHER, that the chairman, chief executive officer, chief financial officer,

president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file a Designation of Preferences, Rights and Limitations of Series I Preferred Stock in accordance with the foregoing resolution and the provisions of

Delaware

 law.

IN WITNESS WHEREOF, the undersigned

have

 executed this Certificate this 1st day of November, 2013.

		
	Signed:

	/s/William Caragol

	Name:

	William J. Caragol

	Title:  

	Chief Executive Officer

		
	Signed:

	/s/ Allison Tomek 

	Name: 

	Allison F. Tomek

	Title:  

	Secretary

5ex10-48.htm

Exhibit 10.48

SEPARATION AND RELEASE AGREEMENT

 

This Separation and Release Agreement (this “Agreement”) is made and entered into as of November 6, 2013, by and between Christopher Cobb (“you” or “your”) and Ideal Power Inc., a Delaware corporation (the “Company”).  You and the Company are sometimes each referred to herein as a “Party” and collectively, as the “Parties”.

RECITALS

WHEREAS, you and the Company desire to separate from your business relationship, as provided herein.

NOW, THEREFORE, in consideration of the premises and mutual promises herein contained, it is agreed as follows:

AGREEMENT

1.           You and the Company understand and agree that neither the making of this Agreement nor the fulfillment of any condition or obligation of this Agreement constitutes an admission of any liability or wrongdoing by the Company, you, any Company Releasee (as defined below) or any Employee Releasee (as defined below).

2.           You and the Company expressly acknowledge and agree that this Agreement, including all exhibits attached to it: (i) is the final, complete and exclusive statement of the agreement of the Parties with respect to the your separation from the Company; (ii) supersedes any prior or contemporaneous agreements, promises, representations, understandings, course of dealing, or terms of any kind, oral or written, with respect to your separation from the Company, including, without limitation, any representations made to you by any executive officer or director of the Company (collectively and severally, the “Prior Agreements”), and that any such Prior Agreements are of no force or effect except as expressly set forth herein; and (iii) may not be varied, supplemented or contradicted by evidence of Prior Agreements, or by evidence of subsequent oral agreements.  Any agreement hereafter made shall be ineffective to modify, supplement or discharge the terms of this Agreement, in whole or in part, unless such agreement is in writing and signed by the Party against whom enforcement of the modification or supplement is sought.

3.           Effective October 25, 2013 (the “Separation Date”), your employment with the Company, including any and all offices you hold with the Company (including without limitation your offices of President and Chief Operating Officer), together with that certain Employment Agreement dated May 8, 2013, will be terminated.

4.           You acknowledge that:

(a)           You have been advised by the Company to consult with the attorney of your choice prior to signing this Agreement.

(b)           You have been given a period of at least twenty-one days within which to consider this Agreement.

(c)           You would not be entitled to receive the consideration offered to you herein but for your signing this Agreement.

(d)           You may revoke this Agreement within seven days after the date you sign it by providing written notice of the revocation to the Company no later than the seventh day after you sign it.  It is understood and agreed that any notice of revocation received by the Company after the expiration of this seven day period shall be null and void.

5.           It is further expressly agreed by you and the Company that this Agreement shall not become effective or enforceable and the consideration referred to in Section 7 below and elsewhere herein will not be paid until the seven day revocation period described in Section 4(d) above has expired.  Therefore, it is expressly agreed by the Parties that the “Effective Date” of this Agreement is the first day after the date the seven day revocation period has expired.

  

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6.           You represent that you have consulted or have had sufficient opportunity to discuss with any person, including the attorney of your choice, all provisions of this Agreement, that you have carefully read and fully understand all the provisions of this Agreement, that you are competent to execute this Agreement, and that you are voluntarily entering into this Agreement of your own free will and accord, without reliance upon any statement or representation of the Company or its representatives.

7.           For the purpose of the following discussion, the number of shares and the per share exercise prices do not reflect the proposed reverse stock split that the Company will effect prior to the consummation of the initial public offering of its common stock (the “IPO”).  Provided that you do not revoke this Agreement and that you comply with your obligations hereunder, the Company agrees to:

allow you to purchase 15,992 shares of the Company’s common stock, at a per share exercise price of $2.65754, covered by the stock option grant for the purchase of 45,155 shares of common stock made pursuant to that certain offer letter dated May 21, 2012 (the “May 2012 Option”); and

allow you to purchase 70,000 shares of the Company’s common stock, at a per share exercise price of $2.10, covered by the stock option grant for the purchase of 150,000 shares of common stock made pursuant to that certain Notice of Grant of Stock Option dated July 19, 2013 (the “July 2013 Option”).  Collectively, the right to purchase the 15,992 shares and the right to purchase the 70,000 shares shall be referred to as the “Post Separation Options”.

The Post-Separation Options will have terms of 24 months, which will start on the date of the consummation of the IPO.  You agree that you will not exercise the Post-Separation Options for a period of 12 months following the consummation of the IPO (the “Lock-Up Period”).  Following the expiration of the Lock-Up Period, you will have a period of 12 months to exercise the Post-Separation Options.  With the exception of the Post-Separation Options, any option that you hold, including the May 2012 Option and the July 2013 Option, will immediately terminate and be of no further force and effect as of the Separation Date.  An agreement memorializing the Post-Separation Options (the “Post-Separation Options Agreement”), substantially in the form attached to this Agreement as Exhibit 1, will be issued to you on the Effective Date.

8.           On the Effective Date, your Company-provided health insurance and all other Company benefits will terminate according to the terms of the plans.  This provision is not, however, intended to waive your rights under COBRA.  You acknowledge that the Company will provide the COBRA notice, in accordance with federal guidelines, under which you may elect continuation of coverage.

9.           Effective as of the Separation Date, you will be deemed to have resigned as the President and Chief Operating Officer of the Company, it being agreed and understood that this Agreement shall serve as irrevocable written notice of such resignation; and furthermore on the Separation Date, you will deliver to the Company an executed Resignation Letter, in substantially the form attached hereto as Exhibit 2.

10.           You agree to make yourself available to consult with the Chief Executive Officer of the Company (the “CEO”) or persons designated by the CEO as reasonably requested by the CEO from time to time through December 31, 2013 (the “Consulting Period”).  You agree that for the first 16 hours of consulting services performed, you shall not be paid for those services.  For any consulting services delivered beyond the initial 16 hours during the Consulting Period, Company will pay an hourly rate of $150 per hour plus expenses, including travel.  The Parties hereto acknowledge that, but for this Agreement, you would not be required to render the services described in this Section 10.

11.           As a material inducement to enter into this Agreement, in addition to the restrictions on transfer relating to the Post-Separation Options, the Company is requiring you to restrict the sale and transfer of securities of the Company held by you in accordance with the terms of that certain lock-up agreement signed by you in connection with the IPO (the “Lock-Up Agreement”), a copy of which is attached to this Agreement as Exhibit 3, and you are agreeable to such restrictions.

12.           You represent and acknowledge that in executing this Agreement, you do not rely and have not relied upon any representation or statement made by the Company or any of its agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise other than the representations contained in this Agreement.

  

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13.           You agree as follows:

(a)           As a material inducement to the Company to enter into this Agreement and subject to the terms of this Section 13, you hereby irrevocably and unconditionally release, acquit and forever discharge the Company and each of its parent, owners, stockholders, predecessors, successors, assigns, agents, directors, officers, employees, representatives, attorneys, divisions, subsidiaries, affiliates and all persons acting by, through, under or in concert with any of them, (collectively the “Company Releasees”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, known or unknown (singularly referred to as a “Claim” or collectively, as “Claims”) which you now have, own, hold, or which you at any time heretofore had, owned, or held against each of the Company Releasees prior to the Effective Date, including, but not limited to: (i) all Claims under the Age Discrimination in Employment Act of 1967, as amended; (ii) all Claims under Title VII of the Civil Rights Act of 1964, as amended; (iii) all Claims under the Employee Retirement Income Security Act of 1974, as amended; (iv) all Claims arising under the Americans With Disabilities Act of 1990, as amended; (v) all Claims arising under the Family and Medical Leave Act of 1993, as amended; (vi) all Claims related to your employment with the Company; (vii) all Claims of unlawful discrimination based on age, sex, race, religion, national origin, handicap, disability, equal pay, sexual orientation or otherwise; (viii) all Claims of wrongful discharge, breach of an implied or express employment contract, negligent or intentional infliction of emotional distress, libel, defamation, breach of privacy, fraud, breach of any implied covenant of good faith and fair dealing and any other federal, state, or local common law or statutory Claims, whether in tort or in contract; (ix) subject to the payment of the Termination Compensation as described in Section 14(d) below, all Claims related to unpaid wages, salary, overtime compensation, bonuses, severance pay, vacation pay, paid-time-off, expenses or other compensation or benefits arising out of your employment with the Company; (x) all Claims arising under any federal, state or local regulation, law, code or statute; (xi) all Claims of discrimination arising under any state or local law or ordinance; and (xii) all Claims relating to any agreement, arrangement or understanding that you have, or may have, with the Company but specifically excluding this Agreement and the Post-Separation Options Agreement.

(b)           You covenant and promise not to sue or otherwise pursue legal action against the Company for any claim released in Section 13(a) above, other than for breach of this Agreement and the Post-Separation Options Agreement, and further covenant and promise to indemnify and defend the Company from any and all such claims, demands and causes of action, including the payment of reasonable costs and attorneys’ fees relating to any claim, demand, or causes of action brought by you related to any claim released in Section 13(a) above.  You agree that should any legal action be pursued on your behalf by any person or other entity against the Company regarding the claims released by you in this Agreement, you will not accept recovery from such action, but will assign such recovery to the Company and agree to indemnify the Company against such claims and assessment of damages.  You further represent that you have filed no lawsuits against the Company.

(c)           You further promise and agree that, provided the Company is not in breach of any portion of this Agreement or the Post-Separation Option, you will not at any time disparage the Company or any of its directors, officers, employees, products, operations, policies, decisions, advertising or marketing programs, if the effect of such disparagement reasonably could be anticipated to cause material harm to the Company’s reputation, business, interests or to the morale among its work force, or the reputation of any Company employee.  Additionally, you will refer all inquiries that you receive (whether written or oral) regarding the business or operations of the Company to the CEO (or his successor or designee).

(d)           You acknowledge that you will continue to be bound by the terms of that certain Ideal Power Converters, Inc. Proprietary Information and Inventions Agreement that you executed on March 1, 2013 (the “Proprietary Information and Inventions Agreement”), a copy of which is attached to this Agreement as Exhibit 4.

14.           The Company agrees as follows:

(a)           As a material inducement to you to enter into this Agreement and subject to the terms of this Section, the Company, on its own behalf and on behalf of each of the Company Releasees, hereby irrevocably and unconditionally releases, acquits and forever discharges you, and your heirs, representatives, successors and assigns and all persons acting by, through, under or in concert with any of them (collectively, the “Employee Releasees”), from any and all Claims which any Company Releasee now has, owns, holds, or which any Company Releasee at any time heretofore had, owned, or held against any of the Employee Releasees (including, without limitation, any Claims arising out of, in connection with, or related to your involvement as an officer or director of the Company).

  

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(b)           The Company covenants and promises not to sue or otherwise pursue legal action against you, other than for breach of this Agreement, the Proprietary Information and Inventions Agreement, the Post-Separation Options Agreement and the Lock-Up Agreement, and further covenants and promises to indemnify and defend you from any and all such claims, demands and causes of action, including the payment of reasonable costs and attorneys’ fees relating to any claim, demand, or causes of action brought by the Company.  The Company agrees that should any legal action be pursued on its behalf by any person or other entity against you regarding the claims released in this Agreement, the Company will not accept recovery from such action, but will assign such recovery to you and agrees to indemnify you against such claims and assessment of damages. The Company further represents that it has filed no lawsuits against you.

(c)           The Company further promises and agrees that it will not and will not permit its directors, officers or employees at any time to disparage you, if the effect of such disparagement reasonably could be anticipated to cause material harm to your reputation.

(d)           Within six days of the Effective Date, the Company further promises and agrees that severance pay in the amount of $87,500, accrued but unpaid compensation owed to you in the amount of $58,835 and unpaid paid-time-off in the amount of $9,019.23 (collectively, the “Termination Compensation”) will be paid, net of any required employee withholdings.  In addition to the Termination Compensation, Company will reimburse to you any Company related business expenses incurred by you up to the Separation Date, so long as you furnish to the Company adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of each such expenditure as an income tax deduction.  If the Company does not have the funds to pay all of the Termination Compensation or the expense reimbursement to you within six days of the Effective Date, the Company will pay you the additional sum of $50 for every day after the sixth day following the Effective Date that any portion of the Termination Compensation is not paid.

15.           If you or the Company determine that the other has breached this Agreement, the non-breaching Party will notify the Party in breach of that fact in writing and the Party in breach will be afforded ten days to cure the breach.

16.           No waiver of any of the terms of this Agreement shall be valid unless in writing and signed by both Parties.  No waiver of a breach or default of any term of this Agreement shall be deemed a waiver of any subsequent breach or default of the same or similar nature.  This Agreement may not be changed except by a writing signed by both Parties.

17.           This Agreement shall be binding upon you and upon your heirs, administrators, representatives, executors, trustees, successors and assigns, and shall inure to the benefit of the Company, the Company Releasees and the Employee Releasees and each of them, and to their heirs, administrators, representatives, executors, trustees, successors, and assigns.

18.           For the same aforesaid consideration, it is further expressly agreed and understood that the Parties will promptly execute any and all documents that are necessary and appropriate to effectuate the terms of this Agreement.

19.           For the same aforesaid consideration, it is expressly agreed and understood that the contents of this Agreement, including its terms, any consideration paid herein, and the parties thereto, shall not be disclosed, released or communicated to any person (except their attorneys, spouses, and tax consultants), including natural persons, corporations, partnerships, limited partnerships, joint ventures, sole proprietorships or other business entities, except for the purpose of enforcing this Agreement or any provision therein or pursuant to a lawful subpoena or except as otherwise required by applicable law (including, without limitation, Federal securities laws). Each Party agrees to give reasonable notice to the other in the event disclosure of this Agreement is sought by subpoena or otherwise.

20.           This Agreement is entered into and shall be interpreted, enforced and governed by the law of the State of Texas.  Any action regarding this Agreement shall be brought in a court in Austin, Texas.  In any proceeding to enforce this Agreement, the prevailing Party shall be entitled to costs and reasonable attorneys’ fees.

  

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21.           All notices and other communications hereunder shall be in writing and shall be given by personal delivery, mailed by registered or certified mail (postage prepaid, return receipt requested) or sent by a nationally recognized overnight courier service to the Parties at the following addresses (or at such other address for a party as is specified by like change of address):

If to the Company:

Chief Executive Officer

c/o Ideal Power Inc.

5004 Bee Creek Road, Suite 600

Spicewood, Texas 78669

If to you:

Christopher Cobb

 

With a copy to:

Conny K. Ruthven

via fax (512) 597-9981

22.           The Parties agree that the Agreement may be executed in multiple copies, each of which will be considered an original.

WHEREFORE, the Parties have executed this Agreement in Spicewood, Texas on the date set forth above.

IDEAL POWER INC.

 

By:/s/ Paul Bundschuh                                                      

 

 

CHRISTOPHER COBB

/s/ Christopher Cobb                                                                

Christopher Cobb

  

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Exhibit 1

POST-SEPARATION OPTIONS AGREEMENT

IDEAL POWER INC.

STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT is made as of ______________, 2013, by and between IDEAL POWER INC., a Delaware corporation (the “Company”), and CHRISTOPHER COBB (the “Optionee”).

W I T N E S S E T H:

WHEREAS, the Company desires to grant to the Optionee an option to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), in consideration for the Optionee’s execution of that certain Separation and Release Agreement dated October 25, 2013.

NOW, THEREFORE, the parties hereto, intending to be legally bound, do agree as follows:

1.           Grant of Option.  Subject to the terms and conditions of this Agreement, the Company hereby grants to the Optionee the right and option to purchase from the Company all or part of an aggregate of 85,992 shares of Common Stock (the “Shares”).  This option is not intended to constitute an incentive stock option within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”).

2.           Exercise Price, Term and Time of Exercise.

(i)           Exercise Price.  The per-share price at which 15,992 of the Shares subject to this option may be purchased by the Optionee pursuant to his exercise of this option shall be $2.65754; the per-share price at which 70,000 of the Shares subject to this option may be purchased by the Optionee pursuant to his exercise of this option shall be $2.10.

(ii)           Option Term.  The term of the option (“Term”) shall begin on the closing of the initial public offering of the Company’s Common Stock, which began with the filing of an S-1 registration statement, SEC number 333-190414 (the “Closing Date”), and shall last until the close of business on the day immediately preceding the second anniversary of the Closing Date; provided, however, that if the Company does not complete an initial public offering of its Common Stock by March 31, 2014, then the term of the option shall begin on April 1, 2014 and shall continue until the close of business on March 31, 2016.

(iii)           Time to Exercise.  The Optionee’s right to exercise this option shall vest on the first anniversary of the Closing Date and shall expire on the close of business on the day immediately preceding the second anniversary of the Closing Date; provided, however, that if the Term begins on April 1, 2014 or the Closing Date takes place after April 1, 2014, then the Optionee’s right to exercise this option shall vest on the later of the first anniversary of the Closing Date or April 1, 2015 and shall continue for a period of 12 months, until the close of business on the day immediately preceding the second anniversary of the Closing Date or the close of business on March 31, 2016.  The definition of “close of business” means 5:00 p.m. Central Time.

3.           Method of Exercise and Payment for Shares; No Rights as a Shareholder.  This option shall be exercised by written notice delivered to the Company at its principal office, specifying the number of Shares to be acquired upon such exercise, and accompanied by cash payment of the exercise price.  The Optionee shall not have any shareholder rights with respect to the Shares until the Optionee shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased Shares.  At the election of the Optionee, the exercise price may be paid in cash (including check or bank draft payable to the order of the Company) or, assuming that a public market for the Common Stock exists, in accordance with the following formula, which shall be referred to as a “Cashless Exercise”:

	
X =

	
Y(A-B)

	
     A

  

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Where, X = the number of Shares to be issued to the Optionee;

Y = the number of Shares for which the option is being exercised;

A = the fair market value of one Share; and

B = the exercise price of one share.

For purposes of the foregoing, the “fair market value of one Share” will be the closing price of one share of Common Stock on the day that the Optionee delivers notice to the Company of his election to make a Cashless Exercise.  If the day on which notice is delivered to the Company is not a trading day, then the fair market value of one Share will be the closing price of one share of Common Stock on the trading day immediately preceding the day on which the Optionee delivers notice to the Company of his election to make a Cashless Exercise.

4.           Non-transferability.  This option is not transferable by the Optionee except as otherwise provided in Section 5 below, and during the Optionee’s lifetime is exercisable only by him.

5.           Exercise After Death.  In the event the Optionee dies before the expiration of the Term, the Optionee’s estate, or the person or persons to whom his rights under this option shall pass by will or the laws of descent and distribution, may exercise this option, to the extent exercisable at the date of death, at any time within six months following the Optionee’s death (but in any event before the expiration of the Term).

6.           Adjustments.

(i)           Adjustments by Stock Split, Stock Dividend, Etc.  If the Company shall at any time increase or decrease the number of its outstanding shares of Common Stock, or change in any way the rights and privileges of such shares, by means of the payment of a Common Stock dividend or the making of any other distribution upon such shares payable in Common Stock, or through a Common Stock split or subdivision of shares, or a consolidation or combination of shares, or through a reclassification or recapitalization involving the Common Stock, then the numbers, rights and privileges of the shares of Common Stock underlying the option granted hereunder shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and non-assessable at the time of such occurrence.

(ii)           Apportionment of Price.  Upon any occurrence described in the preceding subsection (i) of this Section 6, the total option price hereunder shall remain unchanged but shall be apportioned ratably over the increased or decreased number or changed kinds of securities or other property subject to this option.

(iii)           Determination by the Company.  Adjustments under this Section 6 shall be made by the Company, whose determinations with regard thereto shall be final and binding.  No fractional shares of Common Stock shall be issued on account of any such adjustment.

7.           Merger, Consolidation, Etc.

(i)           Effect of Transaction.  Upon the occurrence of any of the following events, if the notice required by Section 7(ii) hereof shall have first been given, the option granted hereunder shall automatically terminate and be of no further force and effect whatsoever, without the necessity for any additional notice or other action by the Company:  (a) the merger, consolidation or liquidation of the Company or the acquisition of its assets or stock pursuant to a nontaxable reorganization, unless the surviving or acquiring corporation, as the case may be, shall assume all outstanding options of the Company or substitute new options for them pursuant to Section 425(a) of the Code; (b) the dissolution or liquidation of the Company; (c) the appointment of a receiver for all or substantially all of the Company’s assets or business; (d) the appointment of a trustee for the Company after a petition has been filed for the Company’s reorganization under applicable statutes; or (e) the sale, lease or exchange of all or substantially all of the Company’s assets and business.

  

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(ii)           Notice of Such Occurrences.  At least 30 days’ prior written notice of any event described in Section 7(i) hereof, except the transactions described in subsections 7(i)(c) and (d) as to which no notice shall be required, shall be given by the Company to the Optionee.  If the Optionee is so notified, he may exercise all or a portion of the entire unexercised portion of this option at any time before the occurrence of the event requiring the giving of notice.  Such notice shall be deemed to have been given when delivered personally to the Optionee or when mailed to the Optionee by registered or certified mail, postage prepaid, at the Optionee’s address included in Section 9 below or an updated address as provided to the Company in writing.

8.           Binding Effect, Entire Agreement.  Subject to the limitations stated above, this Agreement shall be binding upon and inure to the benefit of the personal representatives of the Optionee and the successors of the Company.  This Agreement constitutes the entire agreement between the parties and cannot be altered, modified, or changed in any way unless made in writing and signed by the party against whom such alteration, modification, or change is asserted.

9.           Notices.  With the exception of the notice required by Section 7 above, any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices.  Any notice required to be given or delivered to the Optionee shall be in writing and addressed to the Optionee at the address indicated below.  All notices shall be deemed effective upon personal delivery, or if sent by a nationally recognized overnight courier service to the party to be notified, as follows:

If to the Company:

Chief Executive Officer

c/o Ideal Power Inc.

5004 Bee Creek Road, Suite 600

Spicewood, Texas 78669

If to the Optionee:

Christopher Cobb

With a copy to:

Conny K. Ruthven

via fax (512) 597-9981

Notice of a Cashless Exercise may be given to the Company via electronic mail to paul.bundschuh@idealpower.com.

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its Chief Executive Officer and the Optionee has signed this Agreement.

IDEAL POWER INC.

 

By:_____________________________

      Paul Bundschuh

      Chief Executive Officer

OPTIONEE

________________________________

Christopher Cobb

Optionee

  

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Exhibit 2

LETTER OF RESIGNATION

October ___, 2013

VIA ELECTRONIC MAIL

paul.bundschuh@idealpowerconverters.com

Paul Bundschuh, Chairman

Board of Directors

Ideal Power Inc.

5004 Bee Creek Road, Suite 600

Spicewood, Texas 78669

Dear Paul:

I hereby resign as the President and Chief Operating Officer of Ideal Power Inc. and from any other office I hold, effective immediately.

Very truly yours,

 

Christopher Cobb

  

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Exhibit 3

LOCK-UP AGREEMENT

(Exhibit follows this page.)

  

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Exhibit 4

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

(Exhibit follows this page.)

  

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