Document:

ex10-1.htm

Exhibit 10.1

SEPARATION AND RELEASE AGREEMENT

This Separation and Release Agreement (this “Agreement”) is made and entered into as of November 27, 2013, by and between Charles De Tarr (“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 their 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.           As of November 27, 2013 (the “Separation  Date”) your employment with the Company, including any and all offices you hold with the Company (including without limitation your office of Vice-President, Finance) 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 in Section 7 and Section 10 below 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 7,000 shares of the Company’s common stock, at a per share exercise price of $5.00 (the “July 2013 Option”), covered by the stock option grant for the purchase of 21,000 shares of common stock made pursuant to that certain Notice of Grant of Stock Option dated July 19, 2013.

allow you to purchase 26,743 shares of the Company’s common stock, at a per share exercise price of $0.416675, covered by the stock option grant issued on January 31, 2009 (the “January 2009 Option”).  Collectively, the right to purchase the 7,000 shares and the right to purchase the 26,743 shares shall be referred to as the “Post Separation Option”.

The Post-Separation Option will have a term of 24 months, as to the July 2013 Option, and a term that ends on January 31, 2022 as to the January 2009 Option.  The term will start on the earlier of the date of the consummation of the IPO or January 1, 2014 (the “Term Start Date”).  You agree that you will not exercise the Post-Separation Option for a period of 12 months following the Term Start Date (the “Lock-Up Period”).  Following the expiration of the Lock-Up Period, you will have a period of 12 months to exercise the July 2013 Option and until January 31, 2022 to exercise the January 2009 Option.  With the exception of the Post-Separation Option, any option that you hold, including the option grant made to you on July 19, 2013, will immediately terminate and be of no further force and effect as of the Effective Date.  An agreement memorializing the Post-Separation Option (the “Post-Separation Option Agreement”), substantially in the form attached to this Agreement as Exhibit 1, will be issued to you on the Effective Date.

8.           On the Separation 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 Vice-President, Finance 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 for a period of six months from the Effective Date (the “Consulting Period”).  As compensation for your services, you will be paid a consulting fee of $14,583 per month (the “Consulting Fee”) during the Consulting Period.  The consulting fee will be paid in accordance with the Company’s ordinary and normal payroll practices.  You and the Company agree that, during the Consulting Period, you will provide services on a full-time basis (no less than 8 hours per day and 40 hours per week) and that your services as a consultant may be terminated by the Company at any time during the Consulting Period upon 60 days written notice (the “Notice Period”).  During the Notice Period, unless you and the Company agree to another arrangement in writing, you will not be required to provide consulting services for more than 15 hours per week.  Upon the effective date of your termination as a consultant, the Company will no longer be required to pay the Consulting Fee.  The Parties hereto acknowledge that, but for this Agreement, you would not be required to render the services described in this Section 10.

  

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11.           As a material inducement to enter into this Agreement, in addition to the restrictions on transfer relating to the Post-Separation Option, 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.

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 in this Section 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, 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.  Nothing in this Agreement shall release any claims based on any actions or omissions occurring after the execution of this Agreement.

(b)           You covenant and promise not to sue or otherwise pursue legal action against the Company, 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.  You agree that should any legal action be pursued on your behalf, with your consent, 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.  Nothing in this Agreement shall limit the ability of you to sue or otherwise pursue legal action against the Company on the basis of any acts or omissions occurring after this Agreement is executed by you.

(c)           You further promise and agree that 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).

  

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(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 December 7, 2010 (the “Proprietary Information and Inventions Agreement”), a copy of which is attached to this Agreement as Exhibit 4.  In accordance with the Proprietary Information and Inventions Agreement and this Agreement, you will immediately transfer to the Company all accounting or other Company records held by you, irrespective of the medium in which they are held, and you will provide to Timothy Burns or his designee all user names and passwords for the Company’s accounting software and for any computer that stores the Company’s accounting files and records.

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).

(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 at any time 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 Separation Date, the Company further promises and agrees that accrued but unpaid compensation owed to you in the amount of $27,932.82 (the “Termination Compensation”) will be paid, net of any required employee withholdings.  If the Company does not have the funds to pay all of the Termination Compensation to you within six days of the Separation Date, the Company will pay you the additional sum of $50 for every day after the sixth day following the Separation 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.

 

  

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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.

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), sent by facsimile transmission 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

Facsimile: _________________

If to you:

Charles De Tarr

Facsimile: ________________

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                                                                

CHARLES DE TARR

 

/s/ Charles De Tarr                                                                

Charles De Tarr

  

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Exhibit 1

POST-SEPARATION OPTION AGREEMENT

IDEAL POWER INC.

STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT is made as of December 5, 2013, by and between IDEAL POWER INC., a Delaware corporation (the “Company”), and CHARLES DE TARR (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 November 27, 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 Optionee the right and option to purchase from the Company all or part of an aggregate of 33,743 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 26,743 of the Shares subject to this option (the “January 2009 Shares”) may be purchased by Optionee pursuant to his exercise of this option shall be $0.416675; the per-share price at which 7,000 of the Shares subject to this option (the “July 2013 Shares”) may be purchased by Optionee pursuant to his exercise of this option shall be $5.00.  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

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.

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.

(ii)           Option Term.  As to the July 2013 Shares, the term of the option shall begin on the closing of the initial public offering of the Company’s Common Stock (the “Closing Date”) and shall last until the close of business on the day immediately preceding the second anniversary of the Closing Date.  As to the January 2009 Shares, the term of the option shall begin on the earlier of the Closing Date or January 1, 2014 and shall last until the close of business on January 31, 2022.

  

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(iii)           Time to Exercise.  Optionee’s right to exercise this option shall vest on the first anniversary of the Closing Date and shall expire, as to the July 2013 Shares, on the close of business on the day immediately preceding the second anniversary of the Closing Date.  Optionee’s right to exercise this option as to the January 2009 Shares shall vest on the first anniversary of the Closing Date and shall expire, as to the January 2009 Shares, on the close of business on January 31, 2022.  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.

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

5.           Exercise After Death.  In the event Optionee dies before the expiration of the Term, 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 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.

(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.

  

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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 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 Optionee shall be in writing and addressed to 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 or upon deposit in the U.S. mail, postage prepaid and properly addressed 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:

Charles De Tarr

7105 Valburn Drive

Austin, Texas 78731

Notice of a Cashless Exercise may be given to the Company via electronic mail to tim.burns@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

________________________________

Charles De Tarr

Optionee

  

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Exhibit 2

LETTER OF RESIGNATION

November 27, 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 Vice-President, Finance of Ideal Power Inc. and from any other office I hold, effective immediately.

Very truly yours,

/s/ Charles De Tarr

Charles De Tarr

  

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Exhibit 3

LOCK-UP AGREEMENT

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Exhibit 4

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

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AMENDMENT TO SEPARATION AND RELEASE AGREEMENT

This Amendment to Separation and Release Agreement (this “Amendment”) is made and entered into as of December 5, 2013, by and between Charles De Tarr (“you” or “your”) and Ideal Power Inc., a Delaware corporation (the “Company”) in relation to the following:

RECITALS

A.           On November 27, 2013, you and the Company entered into that certain Separation and Release Agreement (the “Original Agreement”).

B.           The first sentence of the first paragraph of Section 7 of the Original Agreement states:

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”).

C.           On November 21, 2013 the Company effected a reverse split of its common stock in the ratio of 1 share of common stock for every 2.381 shares of common stock (the “Reverse Split”).

D.           You and the Company agree that the first sentence of the first paragraph of Section 7 of the Original Agreement is incorrect, and that the number of shares of common stock covered by the Post-Separation Option reflects the Reverse Split.

THEREFORE, you and the Company agree as follows:

1.           Edit to Section 7.  The first sentence of the first paragraph of Section 7 of the Original Agreement shall be deleted.

2.           Remaining Terms to Remain the Same.  All other terms and conditions of the Original Agreement shall remain the same.

[SIGNATURES APPEAR ON NEXT PAGE]

  

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WHEREFORE, you and the Company have executed this Amendment in Spicewood, Texas on the date set forth above.

IDEAL POWER INC.

By:/s/ Paul Bundschuh                                                                

      Paul Bundschuh, Chief Executive Officer

CHARLES DE TARR

/s/ Charles De Tarr                                                                

Charles De Tarrcredit_agreement.htm

AMENDMENT TWO TO AMENDED AND RESTATED

REVOLVING CREDIT AND TERM LOAN AGREEMENT

This Amendment Two to Amended and Restated Revolving Credit and Term Loan Agreement (“Amendment”) is dated November 30, 2012 (“Effective Date”) by and between ADDVANTAGE TECHNOLOGIES GROUP, INC., an Oklahoma corporation (“Borrower”) and BOKF, NA dba Bank of Oklahoma, formerly known as Bank of Oklahoma, N.A. (“Lender”).

 

RECITALS

 

A. Reference is made to the Amended and Restated Revolving Credit and Term Loan Agreement dated as of November 30, 2010 (as amended, the “Loan Agreement”), by and between Borrower and Lender, under which was established or restated a $7,000,000 revolving line (“Revolving Line”), a $16,300,000 term loan (which has been paid in full), and a $2,760,000 term loan (separately and collectively, the "Loan"), and pursuant to which other loan documents were executed and delivered to Lender, including without limitation the following (together with the Loan Agreement, separately and collectively, the “Loan Documents”): (i) $7,000,000 Promissory Note (“Existing Line Note”) dated November 30, 2011 payable by Borrower to the order of Lender; (ii) $2,760,000 Promissory Note (“$2,760,000 Term Note”) dated November 20, 2006 payable by Borrower to the order of Lender, maturing November 30, 2021, which as of the Effective Date has an outstanding principal balance of $1,701,954; (iii) Security Agreements; (iv) Guaranty Agreements from each of the Guarantors; (v) Subordination Agreements; and (vi) other instruments, documents and agreements executed or delivered to Lender in connection with the Loan Agreement.

 

B. Borrower has requested Lender to extend its Commitment as to the Revolving Line and the maturity date of the Existing Line Note to November 29, 2013; and Lender has agreed to such request, subject to the terms and conditions set forth in this Amendment.

 

AGREEMENT

 

For valuable consideration received, Borrower and Lender agree to the following:

 

1. Definitions. Capitalized terms used in this Amendment (including capitalized terms used in the Recitals) that are not otherwise defined herein have the respective meanings ascribed to them in the Loan Agreement.

 

2. Amendments to Loan Agreement.

 

2.1. Revolving Line Commitment. Subject to the terms and conditions of this Amendment, Lender agrees to extend its Commitment as to the Revolving Line to November 29, 2013; and in furtherance hereof: (i) Section 1.72 (Termination Date) is hereby amended to replace the date “November 30, 2012” to now read “November 29, 2013”; and (ii) Borrower shall execute and deliver to Lender the $7,000,000 Promissory Note (“Renewal Line Note”) in form and content as set forth on EXHIBIT A hereto, which evidences an extension, renewal and modification, but not a novation or payment, of the Existing Line Note.

 

2.2. Jones Broadband International, Inc. Dissolution. Borrower has advised Lender that Jones Broadband International, Inc. (“JBI”) has been dissolved and has requested Lender to waive such occurrence as an Initial Default or Matured Default under Section 9.12 of the Loan Agreement. Lender hereby waives such violation, provided that such waiver shall not constitute a course of conduct or implication of consent to any other dissolution as to Borrower or any other Guarantor. Borrower shall deliver to Lender upon the execution hereof copies of all instruments, documents and agreements relating to such dissolution. Additionally, Lender hereby agrees that the Guaranty Agreement and Security Agreement executed by JBI in favor of Lender are hereby terminated.

 

2.3. Name Change. Borrower has advised Lender that Broadband Remarketing International, LLC (“BRI”) has changed is legal name to ADAMS GLOBAL COMMUNICATIONS, LLC (“AGC”), as evidenced by the Articles of Amendment filed in the office of the Secretary of State of Oklahoma as Document Number 2011025002, dated and submitted September 14, 2012. Borrower hereby authorizes Lender to amend the existing UCC filings as to BRI to evidence such name change.

 

2.4. Dividends and Distributions. Lender has agreed to modify the limitations relating to distributions; accordingly, Section 7.11 is amended to read as follows:

 

“7.11. Dividends and Distributions. Directly or indirectly declare or pay any dividend on, or make any other distribution with respect to (whether by reduction of capital or otherwise), any ownership interest, or make any advances to owners of the Borrower other than for payment of tax liability relating to any permitted dividend or distribution; provided, that Borrower may pay dividends and make distributions, so long as of the time of such dividend of distribution (i) no Initial Default or Matured Default has occurred and is continuing, and (ii) Borrower shall have delivered to Lender a Compliance Certificate evidencing that Borrower is in compliance with the financial covenants set forth in Sections 8.1 and 8.2.”

 

3. Conditions. The effectiveness of this Amendment is subject to satisfaction of the following.

 

3.1. Loan Documents. The following loan documents and other instruments, documents and agreement shall be duly executed and/or delivered to Lender, each in form and substance satisfactory to the Lender:

 

3.1.1. This Amendment;

 

3.1.2. The Renewal Line Note; and

3.1.3. Any other instruments, documents or agreements reasonably requested by Lender in connection herewith.

 

3.2. No Default. No Initial Default or Matured Default shall have occurred and be continuing.

 

3.3. Legal Matters. All legal matters required by Lender and Lender’s legal counsel to be satisfied by the Borrower and any other Loan Party to this Amendment and the transactions contemplated hereby shall have been satisfied satisfactory to the Lender and its legal counsel.

 

3.4. Ratification of Borrower. Borrower shall and hereby (i) ratifies, affirms and restates its obligations under, and acknowledges, renews and extends its continued liability under, the Loan Agreement (as amended hereby) and all other Loan Documents to which it is a party, (ii) agrees that the Loan Agreement (as amended hereby) and all other Loan Documents to which it is a party remain in full force and effect, and (iii) represents that each representation and warranty set forth in the Loan Agreement (as amended hereby) and other Loan Documents to which it is a party remains true, correct and accurate as of the Effective Date, and are hereby restated. Borrower further agrees and represents to Lender that the facts set forth in the Recitals are true and correct.

 

3.5. Ratification of Guaranty Agreements. Each Guarantor, by execution of the ratification following the signature page hereof, shall and hereby (i) agrees to this Amendment, (ii) ratifies, affirms and restates its obligations under, and acknowledges, renews and extends its continued liability under, the Guaranty Agreement as to all Obligations of the Borrower, (iii) confirms that, after giving effect to the amendments provided for herein, the Guaranty Agreement remains in full force and effect, and (iv) represents that each representation and warranty set forth in the Guaranty Agreement remains true, correct and accurate as of the Effective Date, and are hereby restated.

 

3.6. Ratification of Collateral Documents. The Borrower and any other parties to any instruments, documents, agreements, assignments, security agreements or similar security instruments (separately and collectively, the “Collateral Documents”) executed under and pursuant to the Loan Agreement to secure payment of the Obligations of Borrower to Lender, by execution of the ratification following the signature page hereof, shall and hereby (i) agrees to this Amendment, (ii) ratifies, affirms and restates each Collateral Document to which it is a party, (iii) confirms that, after giving effect to the amendments provided for herein, the Collateral Documents remain in full force and effect, (iv) represents that each representation and warranty set forth in the Collateral Documents remains true and correct as of the Effective Date, and are hereby restated as of the Effective Date, and (v) ratifies and confirms that all Exhibits and Schedules attached to the Loan Agreement and other Loan Documents remain true, correct and accurate as of the Effective Date, and are hereby restated.

4. REPRESENTATIONS AND WARRANTIES.

4.1 Additional Representations and Warranties. The Borrower further represents and warrants to the Lender that:

4.1.1. The Borrower, and each other loan party (“Loan Party”) to any Loan Document (other than Lender), has the requisite power and authority and has been duly authorized to execute, deliver and perform its obligations under this Amendment, the Loan Agreement (as amended by this Amendment), and the other Loan Documents set forth under Section 3.1 (separately and collectively, the “Amendment Documents”).

 

4.1.2. The Amendment Documents are valid and legally binding obligations of each respective Loan Party, enforceable in accordance with their respective terms, except as limited by applicable bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally.

 

4.1.3. The execution, delivery and performance of the Amendment Documents by the Loan Parties do not and will not (a) conflict with, result in a breach of the terms, conditions or provisions of, constitute a default under, or result in any violation of the organizational and operating agreements and documents of Borrower or any Loan Party, or any agreement, instrument, undertaking, judgment, decree, order, writ, injunction, statute, law, rule or regulation to which Borrower or any Loan Party is subject or by which the assets and property of the Borrower or any Loan Party is bound or affected, (b) result in the creation or imposition of any lien on any assets or property now or hereafter owned by the Borrower or any Loan Party pursuant to the provisions of any mortgage, indenture, security agreement, contract, undertaking or other agreement to which Borrower or any Loan Party is a party, other than liens in favor of the Lender, (c) require any authorization, consent, license, approval or authorization of, or other action by, notice or declaration to, registration with, any governmental agency or authority or, to the extent any such consent or other action may be required, it has been validly procured or duly taken, or (d) result in the occurrence of an event materially adversely affecting the validity or enforceability of any rights or remedies of the Lender or the Borrower’s or any Loan Party’s ability to perform its obligations under the Loan Agreement and related Loan Documents.

5. MISCELLANEOUS.

 

5.1. Effect of Amendment. The terms of this Amendment shall be incorporated into and form a part of the Loan Agreement. Except as amended, modified and supplemented by this Amendment, the Loan Agreement shall continue in full force and effect in accordance with its stated terms, all of which are hereby reaffirmed, confirmed and restated in every respect as of the date hereof. In the event of any irreconcilable inconsistency between the terms of this Amendment and the terms of the Loan Agreement, the terms of this Amendment shall control and govern, and the agreements shall be interpreted so as to carry out and give full effect to the intent of this Amendment. All references to the Loan Agreement appearing in any of the Loan Documents shall hereafter be deemed references to the Loan Agreement as amended, modified and supplemented by this Amendment. This Amendment supersedes any prior or contemporaneous discussions, representations or agreements, oral or written, concerning the subject matter of this Amendment.

5.2. Descriptive Headings. The descriptive headings of the several paragraphs of this Amendment are inserted for convenience only and shall not be used in the construction of the content of this amendment.

 

5.3. Governing Law. This Amendment, the Loan Agreement, and all other Loan Documents and all matters relating hereto or thereto or arising therefrom (whether sounding in contract law, tort law or otherwise), shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of Oklahoma, without regard to conflicts of laws principles. Borrower hereby consents to the jurisdiction of any state or federal court located within the County of Tulsa, State of Oklahoma and irrevocably agrees that, subject to Lender’s election, all actions or proceedings arising out of or relating to the foregoing described documents and matters shall be litigated in such courts. Borrower expressly submits and consents to the jurisdiction of the aforesaid courts and waives any defense of forum non conveniens. Borrower hereby waives personal service of any and all process and agrees that all such service of process may be made upon Borrower by certified or registered mail, return receipt requested, addressed to Borrower at the address set forth in the Loan Agreement and service so made shall be complete ten (10) days after the same has been posted.

 

5.4. Reimbursement of Expenses. The Borrower agrees to pay the reasonable costs, expenses and fees, including without limitation reasonable legal fees and out-of-pocket expenses of Riggs, Abney, Neal, Turpen, Orbison & Lewis, legal counsel to the Lender, incurred by Lender in connection herewith.

 

5.5. Release of Lender. In consideration of the amendments contained herein, the Borrower and Guarantor hereby waive and release the Lender from any and all claims, damages, disputes, defenses and setoffs, known or unknown, which may have arisen or accrued under the Loan Agreement and the other Loan Documents and the transactions contemplated thereby.

 

5.6. No Waiver. Borrower expressly acknowledges and agrees that the execution of this Amendment shall not constitute a waiver, and shall not preclude the exercise, of any right, power or remedy granted to Lender in any Loan Document, or as provided by applicable law. No previous amendment, modification, extension or compromise entered into with respect to any obligations of Borrower to Lender shall constitute a course of dealing or be inferred or construed as constituting an expressed or implied understanding to enter into any future modification, extension, waiver or compromise. No delay on the part of Lender in exercising any right, power, or remedy shall operate as a waiver thereof, or otherwise prejudice Lender’s rights, powers, or remedies.

5.7. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart.

 

5.8. USA Patriot Act Notification. The Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act of 2001, 31 U.S.C. Section 5318, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Lender to identify the Borrower in accordance therewith.

5.9. Late Fees. To the extent any payment due under any Loan Document is not paid within 10 calendar days of the due date therefore, and, to the extent that the following described fee is deemed to constitute interest, subject to any usury savings clause in the Loan Documents and to the extent permitted by law, in addition to any interest or other fees and charges due under the applicable Loan Document, Borrower shall pay Lender a late fee equal to 5% of the amount of the payment that was required to have been made. Borrower agrees that the charges set forth herein are reasonable compensation to Lender for the acceptance and handling of such late payments.

 

5.10. Waiver of Jury Trial. Each of Borrower and Lender hereby irrevocably waives any and all right to trial by jury in any legal actions or proceeding arising out of or relating to the Loan Documents or the transactions contemplated thereby and agrees that any such action or proceeding shall be tried before a court and not before a jury. Each of Borrower and Lender acknowledges that this waiver is a material inducement to enter into a business relationship, and that each has relied on the waiver in entering into this Amendment and the other Loan Documents, and that each will continue to rely on this waiver in their related future dealings. Each of Borrower and Lender warrants and represents that each has had the opportunity of reviewing this jury waiver with legal counsel, and that each knowingly and voluntarily waives its jury trial rights.

 

5.11. Borrower must provide evidence that flood insurance is not required of Lender; provided, that if the Mortgaged Property is located in a special flood hazard area, a notification thereof shall be provided to and acknowledged by the mortgagor, and adequate proof of flood insurance (either a declaration page or an application for flood insurance accompanied by proof of payment) must be delivered to Lender, equal to the lesser of (i) the outstanding principal balance of the Loan, (ii) the maximum amount available under the NFIP for the particular type of improvement, or (iii) the full insurable value of the improvement.

[SIGNATURE PAGE FOLLOWS]

  

  

  

“Borrower”

ADDVANTAGE TECHNOLOGIES GROUP, INC.,

an Oklahoma corporation

By /s/ Scott A. Francis

  Scott A. Francis, Vice President, Chief

  Financial Officer and Chief Accounting

  Officer

“Lender”

BOKF, NA dba Bank of Oklahoma

By /s/ Timberly Greenly

  Timberly Greenly,

  Assistant Vice President

  

  

  

RATIFICATION OF GUARANTY

As inducement for the Lender to enter into the Amendment Two to Amended and Restated Revolving Credit and Term Loan Agreement (“Amendment”) dated effective November 30, 2012 to which this Ratification is affixed, the undersigned Guarantors each hereby agrees to the Amendment, including without limitation Section 3.5 of the Amendment. This Ratification may be executed in multiple counterparts.

ADDVANTAGE TECHNOLOGIES GROUP OF MISSOURI, INC., a Missouri corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

ADDVANTAGE TECHNOLOGIES GROUP OF NEBRASKA, INC., a Nebraska corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

ADDVANTAGE TECHNOLOGIES GROUP OF TEXAS, INC., a Texas corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

NCS INDUSTRIES, INC.,

a Pennsylvania corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

  

  

  

TULSAT CORPORATION,

an Oklahoma corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

TULSAT-ATLANTA, L.L.C.,

an Oklahoma limited liability company

By ADDvantage Technologies Group, Inc.

Its sole member and manager

By /s/ Scott A. Francis

  Scott A. Francis, Vice President, Chief

  Financial Officer and Chief

  Accounting Officer

ADAMS GLOBAL COMMUNICATIONS, LLC,

an Oklahoma limited liability company (formerly known as BROADBAND REMARKETING INTERNATIONAL, LLC)

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

[JONES BROADBAND INTERNATIONAL, INC. AND TULSAT-PENNSYLVANIA, L.L.C., ARE

INTENTIONALLY OMITTED.]

  

  

  

RATIFICATION OF COLLATERAL DOCUMENTS

As inducement for the Lender to enter into the Amendment Two to Amended and Restated Revolving Credit and Term Loan Agreement (“Amendment”) dated effective November 30, 2012, to which this Ratification is affixed, the undersigned grantors each hereby agrees to Section 3.6 of the Amendment. This Ratification may be executed in multiple counterparts.

ADDVANTAGE TECHNOLOGIES GROUP, INC.,

an Oklahoma corporation

By /s/ Scott A. Francis

  Scott A. Francis, Vice President, Chief

  Financial Officer and Chief Accounting

  Officer

ADDVANTAGE TECHNOLOGIES GROUP OF MISSOURI, INC.,

a Missouri corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

ADDVANTAGE TECHNOLOGIES GROUP OF NEBRASKA, INC.,

a Nebraska corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

ADDVANTAGE TECHNOLOGIES GROUP OF TEXAS, INC.,

a Texas corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

  

  

  

NCS INDUSTRIES, INC.,

a Pennsylvania corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

TULSAT CORPORATION,

an Oklahoma corporation

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

TULSAT-ATLANTA, L.L.C.,

an Oklahoma limited liability company

By ADDvantage Technologies Group, Inc.

Its sole member and manager

By /s/ Scott A. Francis

  Scott A. Francis, Vice President, Chief

  Financial Officer and Chief

  Accounting Officer

ADAMS GLOBAL COMMUNICATIONS, LLC,

an Oklahoma limited liability company (formerly known as BROADBAND REMARKETING INTERNATIONAL, LLC)

By /s/ Scott A. Francis

  Scott A. Francis, Secretary/Treasurer

  

  

  

Exhibit “A”

PROMISSORY NOTE

$7,000,000

Effective November 30, 2012

Tulsa, Oklahoma

FOR VALUE RECEIVED, the undersigned, ADDVANTAGE TECHNOLOGIES GROUP, INC., an Oklahoma corporation ("Maker"), promises to pay to the order of BOKF, NA dba Bank of Oklahoma ("Lender"), at its offices in Tulsa, Oklahoma, the principal sum of SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00) or so much thereof as may have been advanced from time to time pursuant to the Loan Agreement (defined below), together with interest thereon from the date of disbursement at a rate equal to the Interest Rate (defined below), payable as follows:

 

a. Principal. Principal shall be payable at Maturity.

 

b. Interest. Interest shall be payable quarterly on the last day of each February, May, August, and November, commencing February 28, 2013, and at Maturity.

 

In addition to terms defined elsewhere in this Note, the following terms shall have the following definitions:

 

“Base Rate” means the Daily Floating LIBOR Rate, plus 2.75% per annum.

 

“Business Day” means any day other than a Saturday, Sunday or legal holiday on which commercial banks are authorized or required to be closed in Tulsa, Oklahoma.

 

“Default Rate” means the rate per annum equal to the lesser of: (i) the Base Rate plus six percent (6%) per annum; or (ii) the Maximum Rate.

 

“Event of Default” means: (i) any failure by Maker to pay any installment of principal or interest when due under this Note; (ii) any failure by Maker to pay any other sums owed to Lender when due under this Note; (iii) any failure by Maker to pay this Note in full on or before the Maturity Date; or (iv) the occurrence of any Event of Default under the Loan Agreement or any other Loan Documents.

 

“Interest Rate” means the lesser of: (i) the Maximum Rate; or (ii) the Base Rate or Default Rate, whichever is in effect from time to time hereunder.

 

"Daily Floating LIBOR Rate" means, for any day, the British Bankers' Association LIBOR rate for a period of one month for deposits in U.S. dollars as reported on the Bloomberg Professional Service Page BBAM 1 as the offered rate for loans in United States dollars for thirty (30) day periods under the caption British Bankers Association LIBOR Rates as of 11:00 a.m. (London time), announced on such day (or if such day is not a Business Day, the immediately preceding Business Day) divided by (ii) the sum of one minus the daily maximum reserve requirement (expressed as a decimal) then imposed under Regulation D of the Board of Governors of the Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities” (as defined therein). If Bloomberg Professional Service no longer reports the LIBOR or Lender determines in good faith that the rate so reported no longer accurately reflects the rate available to Lender in the London Interbank Market or if such index no longer exists or if Page BBAM 1 no longer exists or accurately reflects the rate available to Lender in the London Interbank Market, Lender may select a replacement index or replacement page, as the case may be.

 

“Loan” means the loan from Lender to Maker in the original principal amount of $7,000,000 evidenced by this Note and the Loan Agreement.

 

“Loan Agreement” means that certain Amended and Restated Revolving Credit and Term Loan Agreement dated November 30, 2010 by and between Maker and Lender evidencing the Loan, together with any amendments or modifications thereto.

 

“Loan Documents” shall have the meaning set forth in the Loan Agreement and in any event shall include this Note, the Loan Agreement and any other instruments, documents and agreements relating thereto, now existing or hereafter arising.

 

“Maturity Date” means the earliest to occur of: (i) November 29, 2013; or (ii) the date on which the entire principal amount evidenced by this Note and all accrued and unpaid interest thereon shall be paid or be required to be paid in full, whether by prepayment, acceleration or otherwise in accordance with the terms of this Note, the Loan Agreement or any of the Loan Documents.

 

“Maximum Rate” means the maximum interest rate allowed by applicable law in effect with respect to the Loan on the date for which a determination of interest accrued hereunder is made and after taking into account all fees, payments and other charges which are, under applicable law, characterized as interest.

 

“Note” means this $7,000,000 Promissory Note.

 

If any payment shall be due on a day other than a Business Day, such payment shall be due and payable on the next succeeding Business Day and interest shall accrue to such day. All interest due hereon shall be computed on the actual number of days elapsed (365 or 366) based upon a 360-day year.

 

All payments under this Note shall be made in lawful currency of the United States of America in immediately available funds at Lender's office described above without abatement, counterclaim or set-off, and no credit shall be given for any payment received by check, draft or other instrument or item until such time as the holder hereof shall have received credit therefor from the holder's collecting agent or, in the event no collecting agent is used, from the bank or other financial institution upon which said check, draft or other instrument or item is drawn.

 

If from any circumstances whatsoever fulfillment of any provision hereof or any of such other agreements shall cause the amount paid to exceed the Maximum Rate, then ipso facto, the amount paid to Lender shall be reduced to the Maximum Rate, and if from any such circumstances Lender shall receive interest which exceeds the maximum Rate, such amount which would be excessive interest shall be applied to the reduction of the principal of this Note and not to the payment of interest, or if such excessive interest exceeds the unpaid principal balance of this Note, and following application thereof to any other costs, expenses and fees due and owing to Lender under the Loan Agreement or any other Loan Documents, such excess shall be refunded to Maker.

 

Upon the occurrence of an Event of Default, this Note and all interest accrued hereon shall become due and payable at the election of the holder hereof, without notice or demand. The payment and acceptance of any sum on account of the Note shall not be considered a waiver of such right of election. Upon and after the occurrence of any Event of Default, the outstanding principal balance of this Note shall accrue interest at the Default Rate.

 

The obligations of Maker hereunder are independent of the obligations to Lender of any present or future guarantor, endorser or other obligor, or any other party who now or hereafter becomes liable under the Note by contract, by operation of law or otherwise (Maker and each such other party are also referred to as an “Obligor”).

 

Maker waives: (i) diligence, notice of default, non-payment, demand for payment, notice of acceptance of this instrument, the Loan Agreement or any other Loan Documents, and indulgences and notices of any kind; (ii) any delay or failure of Lender in the exercise of any right or remedy; (iii) the release, compromise, subordination, substitution, impairment, or failure to perfect any security or any rights or remedies against any Obligor; (iv) any right to marshaling, subrogation, reimbursement or indemnity, until all indebtedness owed to Lender has been fully and indefeasibly paid and Maker’s ability to obtain credit under the Loan Agreement has been irrevocably terminated; (v) any right to request or obtain from Lender information on any Obligor; and (vi) any act, omission or thing which might operate as a legal or equitable defense or discharge of any Obligor(s). Without limiting any other provisions of this Note, Maker waives presentment, demand for payment, protest, notice of nonpayment, and all suretyship defenses.

 

Without notice to, or further consent of any Obligor, Maker consents to: (i) every renewal, forbearance, extensions of time, and other change in the terms or conditions of any indebtedness; (ii) every waiver of Lender’s rights against any Obligor or any security, without such waiver prohibiting the later exercise of the same or similar rights; and (iii) any election of rights or remedies by Lender, including Lender’s enforcement of this Note without first pursuing Lender’s rights against any Obligor or any security. Any bankruptcy, insolvency, merger, consolidation, dissolution or death of any Obligor shall not affect Maker’s obligations to Lender hereunder. Maker subordinates any claim or security it now or hereafter may have against any other Obligor(s) or its assets to any indebtedness Maker owes to Lender. Without limiting any of Lender’s rights or Maker’s obligations, Maker waives all suretyship defenses. Maker agrees that Lender shall have no duty to advise any Obligor of any information regarding any circumstances bearing upon the risk of nonpayment of any indebtedness owed by Maker to Lender.

 

Maker and any other Obligor will, on demand, pay all costs, expenses and fees incurred by the holder hereof in connection with the enforcement and collection of this Note, including without limitation reasonable attorneys’ fees, together with any other such costs, expenses and fees required to be paid by Maker under any other Loan Documents. A photographic or other reproduction of this Note shall be admissible in evidence with the same effect as the original Note in any judicial or other proceeding, whether or not the original is in existence.

 

Notwithstanding any course of dealing or course of performance: (i) neither failure nor delay on the part of Lender to exercise any right, power, or privilege hereunder shall operate, expressly or impliedly, as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege; (ii) no notice to or demand upon Maker shall be deemed to be a waiver of the obligation of Maker or the right of Lender to take further action without notice or demand; and (iii) no amendment, modification, rescission, waiver or release of any provision of this Note shall be effective unless the same shall be in writing and signed by the holder hereof.

 

At any time after the occurrence of an Event of Default, without demand or notice (which Maker expressly waives), and regardless of the adequacy of any other collateral security, Lender may set off against any and all accounts, deposits, credits, collateral and other property now of hereafter in Lender’s possession, custody, safekeeping or control (all of the foregoing whether in Maker’s sole name, jointly with other, or for a specific purpose), and apply same to the amounts outstanding under this Note.

 

If any provision of this Note or any payments pursuant to this Note shall be held invalid or unenforceable to any extent, the remainder of this Note and any other payments hereunder shall not be affected thereby and shall continue to be valid and enforceable to the fullest extent permitted by applicable law.

 

To the extent any principal and interest due under any Loan Document is not paid within 10 calendar days of the due date therefore, and, to the extent that the following described fee is deemed to constitute interest, subject to the savings clause set forth in this Note, in addition to any interest or other fees and charges due hereunder or under the applicable Loan Document, Borrower shall pay a late fee equal to 5% of the amount of the payment that was to have been made. Borrower agrees that the charges set forth herein are reasonable compensation to Lender for the acceptance and handling of such late payments. The imposition or collection of this fee shall not, however, constitute a waiver of any default or demand by Lender.

THIS NOTE AND ALL MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OKLAHOMA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. MAKER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF TULSA, STATE OF OKLAHOMA AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE SHALL BE LITIGATED IN SUCH COURTS. MAKER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. MAKER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON MAKER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO MAKER AT THE ADDRESS SET FORTH IN THIS AGREEMENT OR THE LOAN AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

EACH OF MAKER AND LENDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH OF MAKER AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, WHICH EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS NOTE AND THE OTHER LOAN DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF MAKER AND LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

This Note is given for an actual loan of money for business purposes and not for personal, family, household, agricultural or residential purposes, and is executed and delivered in the State of Oklahoma and shall be governed by and construed in accordance with the laws of the State of Oklahoma. This Note may not be changed orally, but only by and agreement in writing signed by Maker and Lender.

 

Unless otherwise provided herein, all notices, demands and requests required or desired to be given hereunder shall be delivered in accordance with the Loan Agreement.

 

This Note constitutes an extension, renewal and modification, but not a novation or payment, of the $7,000,000 Promissory Note dated November 30, 2011, payable by Maker to the order of Lender.

ADDVANTAGE TECHNOLOGIES GROUP, INC.,

an Oklahoma corporation

By /s/ Scott A. Francis

  Scott A. Francis, Vice President, Chief

  Financial Officer and Chief Accounting

  Officer

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