Exhibit 10.4

 

PERFORMANCE GUARANTY

 

This PERFORMANCE GUARANTY (this “Agreement”) is made as of the 28th day of
December, 2018, by and among Dominion Capital LLC (the “Investor”), DPW
Holdings, Inc., a Delaware corporation (“DPW”), Microphase Corporation, a
Delaware corporation and subsidiary of DPW (“Microphase”), Enertec Systems 2001
Ltd., an Israeli corporation and subsidiary of DPW (“Enertec”), and Ault &
Company, Inc., a Delaware corporation (the “Principal”);

 

W I T N E S S E T H

 

WHEREAS, Milton C. Ault III, the Chief Executive Officer of the Principal, is
the Chief Executive Officer of DPW and has extensive familiarity with and
primary responsibility for the management of DPW’s and its subsidiaries’
businesses, including the business of Microphase and Enertec; and

 

WHEREAS, the Investor extended credit to DPW (a) pursuant to a Senior Secured
Convertible Promissory Note, dated May 15, 2018 (as amended from time to time,
the “May Note”), purchased by the Investor pursuant to a Securities Purchase
Agreement, dated May 15, 2018 (as amended from time to time, the “May SPA”); (b)
pursuant to a Senior Secured Convertible Promissory Note, dated July 2, 2018 (as
amended from time to time, the “July Note”), purchased by the Investor pursuant
to a Securities Purchase Agreement, dated July 2, 2018 (as amended from time to
time, the “July SPA”); and (c) pursuant to a Senior Secured Convertible
Promissory Note, dated September 2, 2018 (as amended from time to time, the
“September Note,” and together with the May Note and the July Note, the “DPW
Notes”), purchased by the Investor pursuant to a Securities Purchase Agreement,
dated September 2, 2018 (as amended from time to time, the “September SPA”); and

 

WHEREAS, the Investor extended credit to Microphase pursuant to a Senior Secured
Promissory Note, dated December 28, 2018 (as amended from time to time, the
“Microphase Note”), which obligation of Microphase is secured by all assets of
Microphase and its subsidiaries pursuant to a Security Agreement, dated December
28, 2018, among Microphase, its subsidiaries and the Investor (as amended from
time to time, the “Microphase Security Agreement”);

 

WHEREAS, the Investor extended credit to Enertec pursuant to a Senior Secured
Promissory Note, dated December 28, 2018 (as amended from time to time, the
“Enertec Note”), which obligation of Enertec is secured by all assets of Enertec
and its subsidiaries pursuant to a Security Agreement, dated December 28, 2018,
among Enertec, its subsidiaries and the Investor (as amended from time to time,
the “Enertec Security Agreement”); and

 

WHEREAS, pursuant to that certain Amendment No. 10 Agreement, dated December 20,
2018, among DPW, the Investor and the Principal (in the form attached hereto as
Exhibit A, “Amendment 10”), the Principal agreed to guarantee the performance of
DPW and its subsidiaries on the outstanding obligations under the DPW Notes and
to guarantee the performance of the obligations of each of Microphase and
Enertec under the Microphase Note and the Enertec Note, respectively; and

 

  

 

 

WHEREAS, pursuant to that certain Personal Guaranty, dated as of December 28,
2018, between Milton C. Ault III, Chief Executive Officer of the Principal, and
the Investor (the “Personal Guaranty”), Milton C. Ault III agreed to personally
guarantee the payment of the obligations of DPW, Microphase and Enertec under
the DPW Notes, Microphase Note and Enertec Note, respectively; and

 

WHEREAS, as used herein, the term “Transaction Documents” means, collectively,
this Agreement, the DPW Notes, each Transaction Document (as defined in each of
the May SPA, July SPA and September SPA), the Enertec Note, the Enertec Security
Agreement, the Microphase Note, the Microphase Security Agreement and the
Personal Guaranty;

 

NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the Investor, the Principal,
DPW, Microphase and Enertec hereby agree as follows:

 

1.                  Recitals. The parties hereto hereby acknowledge and agree
that, to the best of their knowledge, the foregoing recitals are true and
accurate in each and every respect.

 

2.                  Assurances By Principal.

 

(a)               The Principal hereby covenants and agrees for the benefit of
the Investor that (i) the Principal will not intentionally or through conduct
constituting fraud, gross negligence or willful misconduct, and (ii) DPW will
not through intentional acts of the Principal or through conduct constituting
fraud, gross negligence or willful misconduct by the Principal, fail to perform
any covenant, condition, promise, agreement or obligation of DPW under the DPW
Notes, including, without limitation, payment to the Investor of any outstanding
principal amount, accrued but unpaid interest or any other amounts owing to the
Investor under the DPW Notes when due.

 

(b)               The Principal hereby covenants and agrees for the benefit of
the Investor that (i) the Principal will not intentionally or through conduct
constituting fraud, gross negligence or willful misconduct, and (ii) Microphase
will not through intentional acts of the Principal or through conduct
constituting fraud, gross negligence or willful misconduct by the Principal,
fail to perform any covenant, condition, promise, agreement or obligation of
Microphase under the Microphase Note, including, without limitation, payment to
the Investor of any outstanding principal amount, accrued but unpaid interest or
any other amounts owing to the Investor under the Microphase Note when due.

 

(c)               The Principal hereby covenants and agrees for the benefit of
the Investor that (i) the Principal will not intentionally or through conduct
constituting fraud, gross negligence or willful misconduct, and (ii) Enertec
will not through intentional acts of the Principal or through conduct
constituting fraud, gross negligence or willful misconduct by the Principal,
fail to perform any covenant, condition, promise, agreement or obligation of
Enertec under the Enertec Note, including, without limitation, payment to the
Investor of any outstanding principal amount, accrued but unpaid interest or any
other amounts owing to the Investor under the Enertec Note when due.

 

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(d)               If there occurs a breach or violation of any of the
obligations of the Principal, DPW, Microphase or Enertec under Sections 2(a),
2(b) and 2(c) above, which has not been cured within sixty (60) days thereof,
the Principal shall unconditionally, without set-off or deduction, indemnify,
defend and hold the Investor harmless from any and all loss or damage
(including, without limitation, reasonable attorneys’ fees and other reasonable
expenses and costs) to the extent resulting from such breach or violation;
provided, however, that the Principal’s aggregate liability under this Section 2
shall not exceed the sum of $4,350,000 for outstanding obligations under the DPW
Notes, the Microphase Note and the Enertec Note (the “Guarantee Amount”) plus
any and all attorneys’ fees and expenses payable by the Principal in accordance
with Section 3(a) below. The Investor’s books and records shall be prima facie
evidence of the amount of any such loss or damage and any related expenses or
costs.

 

3.                  Default; Waiver; Etc.

 

(a)               DPW agrees to pay all of the Investor’s reasonable attorneys’
fees and expenses relating to a default by the Principal or DPW under this
Agreement in connection with the DPW Notes. Microphase agrees to pay all of the
Investor’s reasonable attorneys’ fees and expenses relating to a default by the
Principal or Microphase under this Agreement in connection with the Microphase
Note. Enertec agrees to pay all of the Investor’s reasonable attorneys’ fees and
expenses relating to a default by the Principal or Enertec under this Agreement
in connection with the Enertec Note. The Principal agrees to pay all of the
Investor’s reasonable attorneys’ fees and expenses relating to a default by the
Principal under this Agreement.

 

(b)               Neither the Investor’s entering into this Agreement, nor any
failure or delay on the part of the Investor in exercising any right, power, or
privilege under this Agreement, the DPW Notes, the Microphase Note, the Enertec
Note or any other Transaction Document shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise of any other right, power or privilege.

 

4.                  Reduction of Guarantee Amount; Termination.

 

(a)               The Guarantee Amount of $4,350,000 shall be reduced by
twenty-five percent (25%) for each one dollar ($1.00) reduction in the
outstanding principal amount under the DPW Notes, the Microphase Note and the
Enertec Note.

 

(b)               This Agreement shall terminate upon the earlier of (i) the
written agreement of the parties hereto and (ii) on such date that (A) no Event
of Default (as defined in each of the Transaction Documents) or other material
default or material breach exists under the Transaction Documents, unless such
Event of Default or other material default or material breach is waived by the
Investor in writing in its sole discretion, (B) the Principal, at its option,
invests a minimum of $11,000,000 in DPW on terms determined by the board of
directors of DPW in its sole discretion, provided that such investment is
completed by June 30, 2019 and (C) DPW has fully complied with its obligations
under Section 2.d of Amendment 10.

 

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5.                  Entire Agreement. The parties hereto acknowledge that this
Agreement represents the final agreement between the parties with respect to the
specific subject matter hereof, and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties. There are
no unwritten oral agreements between the parties.

 

6.                  Amendments; Waivers. This Agreement may not be modified or
amended in any manner except in a writing executed by the parties hereto. No
waiver or amendment shall be deemed to be made by the Investor of any of its
rights hereunder, unless the same shall be in writing and signed by the
Investor, and each waiver, if any, shall be a waiver only with respect to the
specific instance involved and shall in no way impair the rights of the Investor
or the obligations of DPW, Microphase, Enertec or the Principal in any other
respect at any other time.

 

7.                  Notices. Any and all notices, service of process or other
communications or deliveries required or permitted to be given or made pursuant
to any of the provisions of this Agreement shall be in writing and shall be
deemed given and effective on the earliest of: (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
or by email attachment at the email address set forth below at or prior to 5:30
p.m. (Eastern Time) on a business day, (ii) the next business day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number or by email attachment at the email address set forth below
on a day that is not a business day or later than 5:30 p.m. (Eastern Time) on
any business day, (iii) the second (2nd) business day following the date of
mailing, if sent by a U.S. nationally recognized overnight courier service or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be:

 

If to DPW, at:

 

DPW Holdings, Inc.

201 Shipyard Way

Newport, CA 92663

Attn: Milton C. Ault III, Chief Executive Officer

Tel: (949) 444-5464

Fax: (949) 444-5316

Email: Todd@DPWHoldings.com

 

If to Microphase, at:

 

Microphase Corporation

100 Trap Falls Rd. Ext

Suite 400

Shelton, CT 06484

Attn: James Ashman

Tel: (203) 913-0506

Fax: (203) 538-5558

Email: jashman@microphase.com

 

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If to Enertec, at:

 

Enertec Systems 2001 Ltd.

Hanapach 8

Industrial Area 5

Karmiel, Israel

Attn: Nissim Ovadia

Tel: +972 (4) 958-5680

Fax: +972 (4) 988-0603

Email: nissim@enertec.co.il

 

If to the Principal, at:

 

Ault & Company, Inc.

200 Sandpointe Drive, Suite 500

Santa Ana, CA 92707

Attn: Milton C. Ault III, Chief Executive Officer

Tel: (949) 444-5464

Fax: (949) 444-5316

Email: Todd@ault.com

 

If to the Investor, at:

 

Dominion Capital LLC

256 West 38th Street

15th Floor

New York, NY 10018

Attn: Mikhail Gurevich, Managing Member

Tel: (212) 785-4681

Fax: (708) 844-2883

Email: mikhail@domcapllc.com

 

 

or such other facsimile number, email address or address as may be given by the
parties in accordance with the notice provisions hereof.

 

8.               Governing Law; Waiver of Jury Trial. The parties acknowledge
and agree that any claim, controversy, dispute or action relating in any way to
this Agreement and the provisions hereof shall be governed solely by the laws of
the State of New York, without regard to any conflict of laws doctrines. The
parties irrevocably consent to being served with legal process issued from the
state and federal courts located in the City of New York, Borough of Manhattan
(the “New York Courts”) and irrevocably consent to the exclusive personal
jurisdiction of the New York Courts. The parties irrevocably waive any
objections to the personal jurisdiction of the New York Courts. Said courts
shall have sole and exclusive jurisdiction over any and all claims,
controversies, disputes and actions which in any way relate to this Agreement
and the provisions hereof. The parties also irrevocably waive any objections
that the New York Courts constitute an oppressive, unfair, or inconvenient forum
and agree not to seek to change venue on these grounds or any other grounds.
Nothing in this section shall affect or limit any right to serve process in any
other manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

 

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9.                  Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns;
provided, that DPW, Microphase, Enertec and the Principal may not assign any of
their respective obligations hereunder without the Investor’s prior written
consent.

 

10.              Captions. The section titles utilized in this Agreement are for
convenience only, and shall not affect the construction or interpretation of
this Agreement or any of the provisions hereof.

 

11.              Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same binding agreement.

 

12.              Severability. In the event and to the extent that any provision
of this Agreement shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of any other
provisions of this Agreement, all of which shall remain fully enforceable as set
forth herein.

 

 

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.

 

 

 

DPW Holdings, Inc.

 

 

 

By:

Name: Milton C. Ault III
Title: Chief Executive Officer

 

 

Microphase Corporation

 

 

 

By: _____________________________________
Name: James Ashman
Title: Vice President of Finance

 

 

Enertec Systems 2001 Ltd.

 

 

 

By: _____________________________________

Name: Amos Kohn

Title: Chairman of the Board of Directors

 

 

Ault & Company, Inc.

 

 

 

By: _____________________________________

Name: Milton C. Ault III

Title: Chief Executive Officer

 

 

 

Dominion Capital LLC

 

 

 

By: _____________________________________

Name: Mikhail Gurevich

Title: Managing Member

 

 

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Exhibit A

 

 

 

Amendment No. 10 Agreement