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Exhibit 10.35

IDEAL POWER CONVERTERS, INC.

2013 EQUITY INCENTIVE PLAN

As Adopted May 17, 2013

 

1.           PURPOSE.

The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, and its Parent and Subsidiaries (if any), by offering them an opportunity to participate in the Company’s future performance through awards of Options, the right to purchase Common Stock and Stock Bonuses.  Capitalized terms not defined in the text are defined in Section 2.

2.           DEFINITIONS.

As used in this Plan, the following terms will have the following meanings:

“AWARD” means any award under this Plan, including any Option, Stock Award or Stock Bonus.

“AWARD AGREEMENT” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award.

“BOARD” means the Board of Directors of the Company.

“CAUSE” means (i) an intentional act of fraud, financial embezzlement, theft or any other material violation of law that occurs during or in the course of the Participant’s employment with the Company; (ii) intentional damage to the Company’s assets; (iii) intentional disclosure of the Company’s confidential and/or proprietary secrets and information contrary to the Company’s policies; (iv) intentional engagement in any competitive activity which would constitute a breach of the Participant’s duty of loyalty or obligations to the Company; (v) an intentional breach of any of the Company’s policies; (vi) the willful and continued failure to substantially perform the Participant’s duties for the Company (other than as a result of Disability); or (vii) willful conduct by the Participant that is materially injurious to the Company, monetarily or otherwise.

“CODE” means the Internal Revenue Code of 1986, as amended.

“COMMON STOCK” means the common stock, $0.001 par value, of Ideal Power Converters, Inc., a Texas corporation, or any successor corporation.

“COMPANY” means Ideal Power Converters, Inc., a Texas corporation, or any successor corporation.

“COMMITTEE” means the Compensation Committee of the Board of Directors which shall administer and interpret the Plan as more particularly described in Section 5 of the Plan; provided, however, that the term Committee will refer to the Board of Directors during such times as the Board of Directors has no Compensation Committee.

“DISABILITY” means a disability, whether temporary or permanent, partial or total, as determined by the Committee, provided that with respect to any individual who is an employee or other “service provider”, disability shall be determined in accordance with Section 409A of the Code and related regulations.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

  

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“EXERCISE PRICE” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.

“FAIR MARKET VALUE” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

(a)           if such Common Stock is publicly traded and is then listed on a national securities exchange or on Nasdaq, its official closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading or on Nasdaq;

(b)           if such Common Stock is quoted on the Over-the-Counter Bulletin Board, its last sale price on the Over-the-Counter Bulletin Board on the date of determination, provided, however, if no sale takes place on the date of determination then the Fair Market Value will be the last sale price on the Over-the-Counter Bulletin Board on the last trading day prior to the determination date on which a sale was recorded; or

(c)           if neither of the foregoing is applicable, by the Committee in good faith and in accordance with requirements under Section 409A of the Code and related regulations.

 

“INSIDER” means an officer or director of the Company or a Ten Percent Shareholder, as defined in Section 6.3.

“OPTION” means an award of an option to purchase Shares pursuant to Section 6.

“PARENT” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

“PARTICIPANT” means a person who receives an Award under this Plan.

“PERFORMANCE FACTORS” means the factors selected by the Committee, in its sole and absolute discretion, which may be from among, but are not limited to, the following measures to determine whether the performance goals applicable to Awards have been satisfied:

	
  

	
(a)

	
Net revenue and/or net revenue growth;

	
  

	
(b)

	
Earnings before income taxes and amortization and/or earnings before income taxes and amortization growth;

	
  

	
(c)

	
Operating income and/or operating income growth;

	
  

	
(d)

	
Net income and/or net income growth;

	
  

	
(e)

	
Earnings per share and/or earnings per share growth;

	
  

	
(f)

	
Total shareholder return and/or total shareholder return growth;

	
  

	
(g)

	
Return on equity;

	
  

	
(h)

	
Operating cash flow return on income;

	
  

	
(i)

	
Adjusted operating cash flow return on income;

	
  

	
(j)

	
Economic value added; and

	
  

	
(k)

	
Individual business objectives.

  

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“PERFORMANCE PERIOD” means the period of service determined by the Committee, not to exceed five years, during which years of service or performance is to be measured for Stock Awards or Stock Bonuses, if such Awards are restricted.

“PLAN” means this Ideal Power Converters, Inc. 2013 Equity Incentive Plan, as amended from time to time.

“PURCHASE PRICE” means the price at which the Participant of a Stock Award may purchase the Shares.

“SHARES” means shares of the Company’s Common Stock reserved for issuance under this Plan, as adjusted pursuant to Sections 3 and 18, and any successor security.

“STOCK AWARD” means an award of Shares pursuant to Section 7.

“STOCK BONUS” means an award of Shares pursuant to Section 8.

“SUBSIDIARY” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

“TERMINATION” or “TERMINATED” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor or advisor to the Company or a Parent or Subsidiary of the Company.  An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Company, provided that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to a formal policy adopted from time to time by the Company and issued and promulgated to employees in writing.  In the case of any employee on an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the employ of the Company or a Subsidiary as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Option agreement.  The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).

3.           SHARES SUBJECT TO THE PLAN.

3.1           Number of Shares Available.  Subject to Sections 3.2, 3.3 and 18, the total aggregate number of Shares reserved and available for grant and issuance pursuant to this Plan, shall be 1,161,767 Shares and will include Shares that are subject to:  (a) issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option; (b) an Award granted hereunder but forfeited or repurchased by the Company at the original issue price; and (c) an Award that otherwise terminates without Shares being issued.  At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under this Plan and all other outstanding but unvested Awards granted under this Plan.

3.2           Increase in Number of Shares Available.  The maximum aggregate number of Shares that may be granted under the Plan will be increased effective the first day of each of the Company’s fiscal quarters, beginning with the fiscal quarter commencing April 1, 2013, (the “Adjustment Date”) by an amount equal to the lesser of:

(i)           10% of the difference between the number of shares of fully diluted Common Stock outstanding on the applicable Adjustment Date and the number of shares of fully diluted Common Stock outstanding at the beginning of the fiscal quarter immediately preceding the Adjustment Date; or

  

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(ii)           such lesser number of Shares as may be determined by the Board,

provided, however, that the number of Shares that may be granted under the Plan may not exceed 2,000,000 Shares.

3.3           Adjustment of Shares.  In the event that the number of outstanding shares of Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options, and (c) the number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the shareholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Committee.

4.           ELIGIBILITY.

ISOs (as defined in Section 6 below) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company.  All other Awards may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company or any Parent or Subsidiary of the Company, provided such consultants, independent contractors and advisors are natural persons who render bona-fide services not in connection with the offer and sale of securities in a capital-raising transaction or promotion of the Company’s securities.  A person may be granted more than one Award under this Plan.

5.           ADMINISTRATION.

5.1           Committee.

(a)           The Plan shall be administered and interpreted by a Committee consisting of two or more members of the Board.  So long as the Company has a class of its equity securities registered under Section 12 of the Exchange Act, any Committee administering the Plan will consist solely of two or more members of the Board who are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and, if the Board so determines in its sole discretion, who are “outside directors” within the meaning of Section 162(m) of the Code.  To the extent consistent with corporate law, the Committee may delegate to any officers of the Company the duties, power and authority of the Committee under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that only the Committee may exercise such duties, power and authority with respect to Participants who are subject to Section 16 of the Exchange Act.

(b)           Members of the Committee may resign at any time by delivering written notice to the Board.  The Board shall fill vacancies in the Committee.  The Committee shall act by a majority of its members in office.  The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee.

(c)           If the Board, in its discretion, does not appoint a Committee, the Board itself will administer and interpret the Plan and take such other actions as the Committee is authorized to take hereunder; provided that the Board may take such actions hereunder in the same manner as the Board may take other actions under the Certificate of Formation and bylaws of the Company generally.

5.2           Committee Authority.  Without limitation, the Committee will have the authority to:

(a)           construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;

  

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(b)           prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

(c)           select persons to receive Awards;

(d)           determine the form and terms of Awards;

(e)           determine the number of Shares or other consideration subject to Awards;

(f)           determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;

(g)           grant waivers of Plan or Award conditions;

(h)           determine the vesting, exercisability and payment of Awards;

(i)           correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;

(j)           determine whether an Award has been earned; and

(k)           make all other determinations necessary or advisable for the administration of this Plan.

5.3           Committee Discretion.  Any determination made by the Committee with respect to any Award will be made at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan.  The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan to Participants who are not Insiders of the Company.  No member of the Committee shall be personally liable for any action taken or decision made in good faith relating to this Plan, and all members of the Committee shall be fully protected and indemnified to the fullest extent permitted under applicable law by the Company in respect to any such action, determination, or interpretation.

6.           OPTIONS.

The Committee may grant Options to eligible persons and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISO”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following:

6.1           Form of Option Grant.  Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO (hereinafter referred to as the “Stock Option Agreement”), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan.

6.2           Date of Grant.  The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee.  The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.

  

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6.3           Exercise Period.  Options may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of 10 years from the date the Option is granted; and provided further that no ISO granted to a person who directly or by attribution owns more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Shareholder”) will be exercisable after the expiration of five years from the date the ISO is granted.  The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines, provided, however, that in all events a Participant will be entitled to exercise an Option at the rate of at least 20% of the full number of shares of the grant per year over five years from the date of grant, subject to reasonable conditions such as continued employment; and further provided that an Option granted to a Participant who is an officer or director may become fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the Company.

6.4           Exercise Price.  The Exercise Price of an Option will be determined by the Committee when the Option is granted and may be not less than 100% of the Fair Market Value of the Shares on the date of grant; provided that the Exercise Price of an ISO granted to a Ten Percent Shareholder will not be less than 110% of the Fair Market Value of the Shares on the date of grant.  Payment for the Shares purchased may be made in accordance with Section 9 of this Plan.

6.5           Method of Exercise.  Options may be exercised only by delivery to the Company of a written stock option exercise notice (the “Exercise Notice”) in a form approved by the Committee, (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Notice, if any, and such representations and agreements regarding the Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased.

6.6           Termination.  Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following:

(a)           If the Participant’s service is Terminated for any reason except death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable upon the Termination Date no later than 3 months after the Termination Date (or such longer time period not exceeding five years as may be determined by the Committee, with any exercise beyond three months after the Termination Date deemed to be an NQSO).

(b)           If the Participant’s service is Terminated because of the Participant’s death or Disability (or the Participant dies within three months after a Termination other than for Cause or because of Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the Termination Date and must be exercised by the Participant (or the Participant’s legal representative) no later than 12 months after the Termination Date (or such longer time period not exceeding five years as may be determined by the Committee, with any such exercise beyond (i) three months after the Termination Date when the Termination is for any reason other than the Participant’s death or Disability, or (ii) 12 months after the Termination Date when the Termination is for Participant’s death or Disability, deemed to be an NQSO).

(c)           Notwithstanding the provisions in Section 6.6(a) above, if the Participant’s service is Terminated for Cause, neither the Participant, the Participant’s estate nor such other person who may then hold the Option shall be entitled to exercise any Option with respect to any Shares whatsoever, after Termination, whether or not after Termination the Participant may receive payment from the Company or a Subsidiary for vacation pay, for services rendered prior to Termination, for services rendered for the day on which Termination occurs, for salary in lieu of notice, or for any other benefits.  For the purpose of this paragraph, Termination shall be deemed to occur on the date when the Company dispatches notice or advice to the Participant that his service is Terminated for Cause.

  

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6.7           Limitations on Exercise.  The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent the Participant from exercising the Option for the full number of Shares for which it is then exercisable.

6.8           Limitations on ISO.  The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISO are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company, Parent or Subsidiary of the Company) will not exceed $100,000.  If the Fair Market Value of Shares on the date of grant with respect to which ISO are exercisable for the first time by a Participant during any calendar year exceeds $100,000, then the Options for the first $100,000 worth of Shares to become exercisable in such calendar year will be ISO and the Options for the amount in excess of $100,000 that become exercisable in that calendar year will be NQSOs.  In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date of this Plan to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISO, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

6.9           Modification, Extension or Renewal.  The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefore, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted.  Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code.  The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 6.4 of this Plan for Options granted on the date the action is taken to reduce the Exercise Price.

6.10           No Disqualification.  Notwithstanding any other provision in this Plan, no term of this Plan relating to ISO will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.

7.           STOCK AWARD.

A Stock Award is an offer by the Company to sell to an eligible person Shares that may or may not be subject to restrictions.  The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the price to be paid (the “Purchase Price”), the restrictions to which the Shares will be subject, if any, and all other terms and conditions of the Stock Award, subject to the following:

7.1           Form of Stock Award.  All purchases under a Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (the “Stock Purchase Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan.  The offer of a Stock Award will be accepted by the Participant’s execution and delivery of the Stock Purchase Agreement and payment for the Shares to the Company in accordance with the Stock Purchase Agreement.

7.2           Purchase Price.  The Purchase Price of Shares sold pursuant to a Stock Award will be determined by the Committee on the date the Stock Award is granted and may not be less than 100% of the Fair Market Value of the Shares on the grant date, except in the case of a sale to a Ten Percent Shareholder, in which case the Purchase Price will be 110% of the Fair Market Value.  Payment of the Purchase Price must be made in accordance with Section 9 of this Plan.

 

  

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7.3           Terms of Stock Awards.  Stock Awards may, but need not be, subject to such restrictions as the Committee may impose.  These restrictions may be based upon completion of a specified number of years of service with the Company or upon completion of Performance Factors set out in advance in the Participant’s individual Stock Purchase Agreement.  Stock Awards may vary from Participant to Participant and between groups of Participants.  Prior to the grant of a Stock Award subject to restrictions, the Committee shall:  (a) determine the nature, length and starting date of any Performance Period for the Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant.  Prior to the transfer of any Stock Award, the Committee shall determine the extent to which such Stock Award has been earned.  Performance Periods may overlap and Participants may participate simultaneously with respect to Stock Awards that are subject to different Performance Periods and have different performance goals and other criteria.

7.4           Termination During Performance Period.  If a Participant is Terminated during a Performance Period for any reason, then any Stock Awards then held by the Participant that have not vested will be terminated and forfeited.

8.           STOCK BONUSES.

8.1           Awards of Stock Bonuses.  A Stock Bonus is an award of Shares for services rendered to the Company or any Parent or Subsidiary of the Company.  A Stock Bonus will be awarded pursuant to an Award Agreement (the “Stock Bonus Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan.  A Stock Bonus may be awarded for general excellence of service or upon satisfaction of such Performance Factors as are set out in advance in the Participant’s individual Award Agreement (the “Performance Stock Bonus Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan.  Stock Bonuses may vary from Participant to Participant and between groups of Participants, and may be based upon the achievement of the Company, Parent or Subsidiary and/or individual Performance Factors or upon such other criteria as the Committee may determine.

8.2           Terms of Stock Bonuses.  The Committee will determine the number of Shares to be awarded to the Participant.  If the Stock Bonus is being earned upon the satisfaction of performance goals pursuant to a Performance Stock Bonus Agreement, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Stock Bonus; (b) select from among the Performance Factors to be used to measure the performance, if any; and (c) determine the number of Shares that may be awarded to the Participant.  Prior to the payment of any Stock Bonus, the Committee shall determine the extent to which such Stock Bonuses have been earned.  Performance Periods may overlap and Participants may participate simultaneously with respect to Stock Bonuses that are subject to different Performance Periods and different performance goals and other criteria.  The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as may be determined by the Committee.  The Committee may adjust the performance goals applicable to the Stock Bonuses to take into account changes in law and accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships.

8.3           Form of Payment.  The earned portion of a Stock Bonus may be paid to the Participant by the Company either currently or on a deferred basis, with such interest or dividend equivalent, if any, as the Committee may determine.  Payment of an interest or dividend equivalent (if any) may be made in the form of cash or whole Shares or a combination thereof, either in a lump sum payment or in installments, all as the Committee will determine.

9.           PAYMENT FOR SHARE PURCHASES.

Payment for Shares purchased pursuant to this Plan (including Shares issued from the exercise of an Option) may be made in cash (by check or wire transfer) or, where expressly approved for the Participant by the Committee and where permitted by law:

  

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(a)           by cancellation of indebtedness of the Company to the Participant;

(b)           by surrender of shares that either: (1) have been owned by the Participant for more than six months and have been paid for within the meaning of Securities and Exchange Commission Rule 144; or (2) were obtained by the Participant in the public market;

(c)           by waiver of compensation due or accrued to the Participant for services rendered;

(d)           with respect only to purchases upon exercise of an Option, and provided that a public market for the Company’s stock exists:

(1)           through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

                                (2)           through a “margin” commitment from the Participant and a FINRA Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the FINRA Dealer in a margin account as security for a loan from the FINRA Dealer in the amount of the Exercise Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

(f)           by any combination of the foregoing.

10.           WITHHOLDING TAXES.

10.1           Withholding Generally.  Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares.  Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements.

10.2           Stock Withholding.  When, under applicable tax laws, a participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined.  All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee and will be in writing in a form acceptable to the Committee.

11.           PRIVILEGES OF STOCK OWNERSHIP.

No Participant will have any of the rights of a shareholder with respect to any Shares until the Shares are issued to the Participant.  After Shares are issued to the Participant, the Participant will be a shareholder and will have all the rights of a shareholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are issued pursuant to a Stock Award with restrictions, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Stock Award.

 

  

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12.           NON-TRANSFERABILITY.

Awards of Shares granted under this Plan, and any interest therein, will not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, other than by will or by the laws of descent and distribution.  Awards of Options granted under this Plan, and any interest therein, will not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, other than by will or by the laws of descent and distribution.  During the lifetime of the Participant an Award will be exercisable only by the Participant.  During the lifetime of the Participant, any elections with respect to an Award may be made only by the Participant unless otherwise determined by the Committee and set forth in the Award Agreement with respect to Awards that are not ISOs.

13.           CERTIFICATES.

All certificates for Shares or other securities delivered under this Plan will be subject to such stop transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the Securities and Exchange Commission or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

14.           ESCROW; PLEDGE OF SHARES.

To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates.

15.           EXCHANGE AND BUYOUT OF AWARDS.

The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards.  The Committee may at any time buy from a Participant an Award previously granted with payment in cash, Shares or other consideration, based on such terms and conditions as the Committee and the Participant may agree.

16.           SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.

16.1           Compliance with Securities Laws in Conjunction with Grants of Awards.  An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable.  The Company will be under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

 

  

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16.2           Compliance with Securities Laws in Conjunction with Exercise, Sale or Disposition of Award Securities.  Participants understand that the sale or disposition (including through exercise) of Options, the Shares acquired by exercise of the Options and the Shares granted as Stock Awards and Stock Bonuses (collectively, the “Award Securities”) are subject to federal and state securities laws.  As such, the sale or disposition (including through the exercise of Options) of Award Securities may be restricted during certain periods (“Blackout Period”).  Participants agree that they will promptly notify the Company’s Chief Financial Officer or the Chairperson of the Committee of an intent to exercise an Option or to sell or otherwise dispose of Award Securities and will not engage in the exercise, sale or other disposition of Award Securities unless such exercise, sale or other disposition is approved in writing by the Company.  If the Company is unable to approve the exercise of an Option, and the Participant’s right to exercise the Option will expire or terminate during the Blackout Period, the Committee will, in good faith, review the circumstances relating to the Option exercise and, in its discretion, may

extend the exercise period.

17.           NO OBLIGATION TO EMPLOY.

Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without cause.

18.           CORPORATE TRANSACTIONS.

18.1           Assumption or Replacement of Awards by Successor.  Unless an Award Agreement provides otherwise, in the event of (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the shareholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Participants), (c) a merger in which the Company is the surviving corporation but after which the shareholders of the Company immediately prior to such merger (other than any shareholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (d) the sale of substantially all of the assets of the Company, or (e) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, any or all outstanding Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on all Participants.  In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to shareholders (after taking into account the existing provisions of the Awards).  The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant.  In the event such successor corporation (if any) refuses to assume or substitute Awards, as provided above, pursuant to a transaction described in this Subsection 18.1, (i) the vesting of any or all Awards granted pursuant to this Plan will accelerate upon a transaction described in this Section 18 and (ii) any or all Options granted pursuant to this Plan will become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines.  If such Options are not exercised prior to the consummation of the corporate transaction, they shall terminate at such time as determined by the Committee.  Notwithstanding anything to the contrary herein or in any Award Agreement, in any assumptions or replacements of Stock Options, Stock Awards or Stock Bonuses that are subject to Section 409A of the Code, the determination of equal or equivalent value shall be made in accordance with the provisions of Section 409A and related regulations.  Similarly, in any assumptions or replacements of ISOs, the determination of equal or equivalent value shall be made in accordance with Section 424 of the Code and related regulations.

18.2           Other Treatment of Awards.  Subject to any greater rights granted to Participants under the foregoing provisions of this Section 18, in the event of the occurrence of any transaction described in Section 18.1, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets.

  

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18.3           Assumption of Awards by the Company.  The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan.  Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant.  In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code).  In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.

19.           ADOPTION AND SHAREHOLDER APPROVAL.

This Plan will become effective on the date on which it is adopted by the Board (the “Effective Date”).  Upon the Effective Date, the Committee may grant Awards pursuant to this Plan.  The Company intends to seek shareholder approval of the Plan within 12 months after the date this Plan is adopted by the Board; provided, however, if the Company fails to obtain shareholder approval of the Plan during such 12-month period, pursuant to Section 422 of the Code, any Option granted as an ISO at any time under the Plan will not qualify as an ISO within the meaning of the Code and will be deemed to be an NQSO.

20.           TERM OF PLAN/GOVERNING LAW.

Unless earlier terminated as provided herein, this Plan will terminate 10 years from the date this Plan is adopted by the Board or, if earlier, the date of shareholder approval.  This Plan and all agreements thereunder shall be governed by and construed in accordance with the laws of the State of Texas.

21.           AMENDMENT OR TERMINATION OF PLAN.

The Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that no amendments to the Plan will be effective without approval of the shareholders of the Company if shareholder approval of the amendment is then required pursuant to Section 422 of the Code or the rules of any stock exchange or quotation system on which the Common Stock is listed.

22.           NONEXCLUSIVITY OF THE PLAN.

Neither the adoption of this Plan by the Board, the submission of this Plan to the shareholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

23.           ACTION BY COMMITTEE.

Any action permitted or required to be taken by the Committee or any decision or determination permitted or required to be made by the Committee pursuant to this Plan shall be taken or made in the Committee’s sole and absolute discretion.

  

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WHEREFORE, this Ideal Power Converters, Inc. 2013 Equity Incentive Plan has been adopted by the Board on the 17th day of May 2013.

IDEAL POWER CONVERTERS, INC.

By:/s/ Paul Bundschuh                                                                                     

      Paul Bundschuh, Chief Executive Officer

 

 

 

-13-mdb1warrant.htm

Exhibit 10.36

 

No. MDB-1 Issue Date: November 21, 2012

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS,OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.

 

IDEAL POWER CONVERTERS, INC.

STOCK PURCHASE WARRANT

 

THIS CERTIFIES that MDB Capital Group, LLC (the “Holder”) is entitled, upon the terms and subject to the conditions hereinafter set forth in this Warrant (this “Warrant”), at any time on or after (except as otherwise limited below) the date of the applicable event specified in Section 2 below setting forth the Exercise Price and on or prior to the Expiration Date, but not thereafter, to subscribe for and to purchase from Ideal Power Converters, Inc., a Texas corporation (the “Company”), 477,135 shares of the Company's common stock, $0.001 par value (the “Common Stock”).

 

This Warrant is issued in accordance with the terms of that certain Engagement Letter for Strategic Consulting Services dated July 24, 2012.

 

The following is a statement of the rights of the Holder of this Warrant and the conditions to which this Warrant is subject, to which the Holder, by the acceptance of this Warrant, agrees:

 

1. Certain Definitions.

 

1.1           “Calendar Due Date” shall mean November 21, 2013.

 

1.2           “Change of Control” means any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, and shall be deemed to be occasioned by, or to include, (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any stock acquisition, reorganization, merger or consolidation) unless the Company’s shareholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least a majority of the voting power of the surviving or acquiring entity, or its direct or indirect parent entity (except that the sale by the Company of shares of its capital stock to investors in bona fide equity financing transactions shall not be deemed a Change of Control for this purpose) or (ii) a sale, exclusive license or other disposition of all or substantially all of the assets of the Company, including a sale, exclusive license or other disposition of all or substantially all of the assets of the Company’s subsidiaries, if such assets constitute substantially all of the assets of the Company and such subsidiaries taken as a whole.

 

1.3           “Exercise Price” is defined in Section 2 below.

 

1.4           “Expiration Date” means, unless earlier terminated pursuant to Section 9 hereof, that date that is seven years after the issue date set forth above.

 

  

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1.5           “IPO” means a firm commitment underwritten initial public offering of the Company’s Common Stock pursuant to a registration statement declared effective by the Securities and Exchange Commission which closes before the Calendar Due Date and results in gross proceeds to the Company of at least $10 million.

 

1.6            “IPO Price” means the price per share of the Company's Common Stock offered to public investors in an IPO, without regard to any underwriting discount or expense (as appropriately adjusted to reflect stock dividends, stock splits, combinations, recapitalizations and the like with respect to the Company’s capital stock after the date hereof).

 

1.7           “Private Equity Financing” means a privately marketed equity financing resulting in gross proceeds in excess of $250,000 which closes before the Calendar Due Date; provided, however, that none of the following issuances of securities shall constitute a “Private Equity Financing”: (i) the offering of senior secured convertible promissory notes or any other debt offering; (ii) securities issued without consideration in connection with any stock split or stock dividend on, the Company’s Common Stock; (iii) securities issued to the Company’s employees, officers, directors, consultants, advisors or service providers pursuant to any plan, agreement or similar arrangement unanimously approved by the Company’s board of directors; (iv) securities issued to banks or equipment lessors; (v) securities issued in connection with sponsored research, collaboration, technology license, development, original equipment manufacturing (OEM), marketing or other similar agreements or strategic partnerships; (vi) securities issued in connection with a bona fide business acquisition of or by the Company (whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise); (vii) the Investment Unit dated October 1, 2010, issued by the Company to the Office of the Governor Economic Development and Tourism, and any securities relating to the conversion or exercise thereof; or (viii) any right, option or warrant to acquire any security convertible into or exercisable for the securities listed in clauses (i) through (vii) above.

 

1.8           “Private Equity Financing Price” means the price per share of Common Stock paid by investors in the Private Equity Financing, which shall be determined by dividing (a) the total consideration received or to be received by each investor assuming exercise in full of all warrants or similar securities, divided by (b) the total number of shares of Common Stock acquirable either directly or by conversion or exercise of instruments, by the Holder, on a fully diluted basis.

 

1.9           “Shares” means the shares of Common Stock issuable under this Warrant, computed in accordance with Section 2 below.

 

2. Exercise Price

 

The Exercise Price shall be determined as follows (subject to appropriate adjustments pursuant to Section 10):

 

(i)           in the event of an IPO that occurs prior to the Calendar Due Date, the per-share exercise price shall be equal to the lower of 0.70 times the IPO Price or $1.46 in which case this Warrant will become exercisable, in whole or in part, one hundred eighty (180) days after the completion of the IPO; or

 

(ii)           in the event of a Private Equity Financing that occurs prior to the Calendar Due Date, the per-share exercise price shall be equal to the lower of 0.70 times the Private Equity Financing Price or $1.46 in which case this Warrant will become exercisable, in whole or in part, on the Calendar Due Date; provided, however, that (A) if the Company undertakes first, a Private Equity Financing and secondly, an IPO prior to the Calendar Due Date and (B) the Private Equity Financing Price is higher than the IPO Price, then the per share exercise price and the period of exercisability shall be adjusted to equal the number of shares of Common Stock, the exercise price and the time period in which this Warrant may be exercised calculated in accordance with subsection (i) above; or

 

(iii)           If the Company does not undertake either a Private Equity Financing or an IPO prior to the Calendar Due Date, and this Warrant will become exercisable, in whole or in part, on the Calendar Due Date, provided however, that if, and for so long as, the Company has on file on the Calendar Due Date a registration statement undertaking an IPO underwritten by the Holder that has not yet become effective, then the Calendar Due Date shall be deemed to have occurred on the earlier of (a) the date the undertaken IPO has been abandoned by the Holder; or (b) one hundred eighty (180) days after the completion of the IPO, as the case may be, then the exercise price shall be $1.46 per share.

 

  

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3. Exercise of Warrant

 

3.1 The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly executed at the Company’s principal executive office (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), and upon payment of the aggregate Exercise Price of the Shares thereby purchased (by cash or by check or bank draft payable to the order of the Company); whereupon the Holder shall be entitled to receive a certificate for the number of Shares so purchased.  The Company agrees that if at the time of the surrender of this Warrant and purchase of the Shares, the Holder shall be entitled to exercise this Warrant, the Shares so purchased shall be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been exercised as aforesaid or on such later date requested by the Holder or on such earlier date agreed to by the Holder and the Company.

 

3.2 In lieu of exercising this Warrant by payment of cash or check or bank draft payable to the order of the Company pursuant to subsection 3.1 above, the Holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being exercised), at any time after the date hereof and before the close of business on the Expiration Date, by surrender of this Warrant at the principal executive office of the Company, together with the Notice of Cashless Exercise annexed hereto, in which event the Company will issue to the Holder Shares in accordance with the following formula:

 

Y(A-B)

X     =          A

 

	
Where,

	
X

	
=

	
The number of Shares to be issued to Holder;

	  	
Y

	
=

	
The number of Shares for which the Warrant is being exercised;

	  	
A

	
=

	
The fair market value of one Share; and

	  	
B

	
=

	
The appropriate Exercise Price.

 

(a) For purposes of this subsection 3.2, the fair market value of a Share is defined as follows:

 

(i) if the Holder exercises within three days of the closing of the IPO, then the fair market value shall be the IPO Price;

 

(ii) if the Holder exercises after receipt of a notice of a Change of Control but before a Change of Control, then the fair market value shall be the value to be received in such Change of Control by the holders of the Company's Common Stock;

 

(iii) if the exercise occurs more than three days after the closing of the IPO, and:

 

(1) if the Common Stock is traded on a securities exchange or the Nasdaq Stock Market, the fair market value shall be the last sale price on the trading day immediately prior to the Company's receipt of the Notice of Conversion or, if no sale of the Company's Common Stock took place on the trading day immediately prior to the receipt of the Notice of Conversion, then the fair market value shall be the last sale price on the most recent day prior to the receipt of the Notice of Conversion on which trades were made and reported; or

 

  

-3-

  

(2) if the Common Stock is traded over-the-counter, the value shall be deemed to be the last sale price on the trading day immediately prior to the Company's receipt of the Notice of Conversion or, if no sale of the Company's Common Stock took place on the trading day immediately prior to the receipt of the Notice of Conversion, then the fair market value shall be the last sale price on the most recent day prior to the receipt of the Notice of Conversion on which trades were made and reported;

 

(iv) if there is no active public market for the Common Stock, the fair market value thereof shall be determined in good faith by the Company’s Board of Directors.

 

3.3 The exercise or conversion of this Warrant in connection with a Change of Control may, at the election of the Holder, be conditioned upon the closing of such Change of Control, in which event the Holder shall not be deemed to have exercised or converted thisWarrant until immediately prior to the closing of such Change of Control.

 

4. Nonassessable

 

The Company covenants that all Shares which may be issued upon the exercise of this Warrant will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof.  Certificates for Shares purchased hereunder shall be delivered to the Holder promptly after the date on which this Warrant shall have been exercised.

 

5. Fractional Shares

 

No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  With respect to any fraction of a share called for upon the exercise of this Warrant, such fractional share shall be rounded down to the nearest whole share, and the Company shall pay to the Holder the amount of such fractional share multiplied by an amount equal to such fraction multiplied by the then current fair market value (determined in accordance with Section 3.2(a)) of a Share shall be paid in cash to the Holder.

 

6. Charges, Taxes and Expenses

 

Issuance of certificates for Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder.

 

7. No Rights as Shareholders

 

.           This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof.

 

8. Saturdays, Sundays, Holidays, etc.

 

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

 

9. Registration of Warrant Shares

For purposes of this Warrant, the Holder shall be included in the definition of the term "Purchasers" included in that certain Registration Rights Agreement dated November 21, 2012 (the “Registration Rights Agreement”) executed by the Company and shall have the same rights and obligations as to the registration of the Shares as have been granted to the Purchasers in the Registration Rights Agreement.  The Registration Rights Agreement is attached to this Warrant as Exhibit B and made a part of it.

10. Adjustments  The Exercise Price and the number of Shares purchasable hereunder are subject to adjustment from time to time as set forth in this Section 10.

  

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10.1 Reclassification, etc.  If the Company, at any time while this Warrant, or any portion hereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities or any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section10.

10.2 Subdivision or Combination of Shares.  In the event that the Company shall at any time subdivide the outstanding securities as to which purchase rights under this Warrant exist, or shall issue a stock dividend on the securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such subdivision or to the issuance of such stock dividend shall be proportionately increased, and the Exercise Price shall be proportionately decreased, and in the event that the Company shall at any time combine the outstanding securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such combination shall be proportionately decreased, and the Exercise Price shall be proportionately increased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be.

10.3 Cash Distributions.  No adjustment on account of cash dividends or interest on the securities as to which purchase rights under this Warrant exist will be made to the Exercise Price under this Warrant.

11. Notice of Certain Events  The Company will provide notice to the Holder with at least 20 days notice prior to the closing of a Change of Control or an IPO.  Such notice shall be in accordance with the notice provision included at Section 12(e) of the Securities Purchase Agreement.

 

12. Purchase Rights; Fundamental Transactions.  In addition to any adjustments pursuant to Section 10 above, if at any time the Company 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 Common Stock (“Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant 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.

13.           Intentionally Omitted

14.           Miscellaneous

14.1           Loss, Theft, Destruction or Mutilation of Warrant.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new Warrant executed in the same manner as this Warrant and of like tenor and amount.

14.2           Waivers and Amendments.  This Warrant and the obligations of the Company and the rights of the Holder under this Warrant may be amended, waived, discharged or terminated (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) with the written consent of the Company (which shall not be required in connection with a waiver of rights in favor of the Company) and the Holder, provided, however, that nothing shall prevent the Holder from individually agreeing to waive the observation of any term of this Warrant.  Any amendment, waiver, discharge or termination effected in accordance with this Section 14.2 shall be binding upon the Company and the Holder.

  

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14.3           Notices.  Any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient when delivered personally (including two business days after deposit with a reputable overnight courier service, properly addressed to the party to receive the same) or sent by fax or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party's address or fax number as set forth below or as subsequently modified by written notice.  Notice shall be given as follows:

If to Holder:                           MDB Capital Group, LLC

401 Wilshire Boulevard, Suite 1020

Santa Monica, California 90401

Attn.:  Anthony DiGiandomenico

If to Company:                      Ideal Power Converters, Inc.

5004 Bee Creek Road, Suite 600

Spicewood, Texas 78669

Attn.:  Chief Executive Officer

14.4           Severability.  If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of this Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

14.5           Successors and Assigns.  Neither this Warrant nor any rights hereunder are transferable without the prior written consent of the Company.  Notwithstanding the foregoing, the Holder shall be permitted to transfer this Warrant to any affiliate (as that term is defined in the Securities Act of 1933) of the Holder.  If a transfer is permitted pursuant to this Section, the transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Company at its principal offices, and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer.  In the event of a partial transfer, the Company shall issue to the holders one or more appropriate new warrants.  Subject to the foregoing, the provisions of this Warrant shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the Company and the Holder.

14.6           Delays or Omissions.  No delay or omission to exercise any right, power, or remedy accruing to the Holder, upon any breach or default of the Company under this Warrant shall impair any such right, power, or remedy of the Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default therefore or thereafter occurring.  Any waiver, permit, consent, or approval of any kind or character on the part of the Holder of any breach or default under this Warrant or any waiver on the part of the Holder of any provisions or conditions of this Warrant must be made in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Warrant or by law or otherwise afforded to the Investors, shall be cumulative and not alternative.

14.7           Titles and Subtitles.  The titles of the paragraphs and subparagraphs of this Warrant are for convenience of reference only and are not to be considered in construing this Warrant.

14.8           Construction.  The language used in this Warrant will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

14.9           Governing Law.  THIS WARRANT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW YORK AS SUCH LAWS ARE APPLIED TO AGREEMENTS BETWEEN NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK.

 

 

[Remainder of page intentionally left blank]

  

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

 

 

 

Ideal Power Converters, Inc.

By:  _______________________

Paul Bundschuh

Chief Executive Officer

Address:   5004 Bee Creek Road, Suite 600

                  Spicewood Texas 78669

 

Attn:          Paul Bundschuh

 

  

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NOTICE OF EXERCISE

 

 

TO:           Ideal Power Converters, Inc.

5004 Bee Creek Road, Suite 600

Spicewood, Texas 78669

Attn:  Secretary

 

 

The undersigned hereby elects to purchase ______________ shares (the “Shares”) of the Common Stock of Ideal Power Converters, Inc. pursuant to the terms of the attached Warrant and tenders herewith payment of the purchase price in full.

 

 

Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:

 

 

(Print Name)

Address:                                                      

 

 

The undersigned confirms that the undersigned is an “accredited investor,” and that the Shares are being acquired for the account of the undersigned for investment only and not with a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or selling the Shares.

 

 

 

 

(Date)                                                                      (Signature)

 

(Print Name)

 

  

-8-

  

NOTICE OF CASHLESS EXERCISE

 

 

 

TO:           Ideal Power Converters, Inc.

5004 Bee Creek Road, Suite 600

Spicewood, Texas 78669

Attn:  Secretary

 

The undersigned hereby elects to purchase ______________ shares (the “Shares”) of the Common Stock of Ideal Power Converters, Inc. pursuant to the cashless exercise provision of Section 3 of the attached Warrant.

 

 

Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:

 

(Print Name)

 

Address:                                                      

 

 

The undersigned represents that the undersigned is an “accredited investor,” and that the Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.

 

 

(Date)                                                                      (Signature)

 

(Print Name)

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