Exhibit 10.1

 

 

SECURITIES PURCHASE AGREEMENT

 

 

by and among

 

 

DIGITAL POWER CORPORATION

 

 

PHILOU VENTURES, LLC

 

 

and

 

 

TELKOOR TELECOM LTD.

 

 

 

 

 

 

 

DATED AS OF SEPTEMBER 4, 2016

 

 
i 

--------------------------------------------------------------------------------

 

 

TABLE OF CONTENTS

 

 

     

PREAMBLE

1

CERTAIN DEFINITIONS

1

     

ARTICLE I 

THE ACQUISITION

4

SECTION 1.1

The Acquisition

4

SECTION 1.2

Payment Terms

4

SECTION 1.3

Delivery of Subject Shares

4

ARTICLE II 

CLOSING

4

SECTION 2.1

Closing

4

SECTION 2.2

Deliveries at Closing by the Seller

5

SECTION 2.3

Deliveries at Closing by the Purchaser

5

SECTION 2.4

Deliveries at Closing by the Company

5

SECTION 2.5

The Company’s Board of Directors

5

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER

6

SECTION 3.1

Corporate Organization

6

SECTION 3.2

Authority

6

SECTION 3.3

Capitalization

6

SECTION 3.4

Consents; Permits; Defaults

7

SECTION 3.5

Non-Contravention

7

SECTION 3.6

Financial Statements

7

SECTION 3.7

Contracts

7

SECTION 3.8

Absence of Certain Changes or Events

8

SECTION 3.9

Absence of Undisclosed Liabilities and Agreements

9

SECTION 3.10

Compliance with Law

9

SECTION 3.11

Tax Matters

10

SECTION 3.12

Absence of Questionable Payments

10

SECTION 3.13

Litigation

10

SECTION 3.14

Title to Property

10

SECTION 3.15

Intellectual Property

10

SECTION 3.16

Absence of Certain Business Practices

10

SECTION 3.17

Transactions with Affiliates

11

SECTION 3.18

Absence of Certain Control Person Actions of Events

11

SECTION 3.19

SEC Reports

11

 

 
ii 

--------------------------------------------------------------------------------

 

 

SECTION 3.20

Books and Records; Internal Accounting Controls

11

SECTION 3.21

Broker

11

SECTION 3.22

Common Stock Symbol

11

SECTION 3.23

No Commission or NYSE MKT Inquires; Delisting

12

SECTION 3.24

Disclosure of Material Information

12

SECTION 3.25

Labor Matters

12

SECTION 3.26

Employment Agreements and Plans

12

SECTION 3.27

Insurance

12

SECTION 3.28

Subject Shares

12

SECTION 3.29

Director and Officer Insurance

12

SECTION 3.30

Prior Sales of Securities

12

SECTION 3.31

DTC Eligibility

12

SECTION 3.32

No Subsidiaries

12

SECTION 3.33

Disclosure

12

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

13

SECTION 4.1

Authority

13

SECTION 4.2

No Conflict

13

SECTION 4.3

Information in Form 8-K

13

SECTION 4.4

Securities Act Representations

13

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE SELLER

14

SECTION 5.1

Ownership of the Subject Shares

14

SECTION 5.2

Authority Relative to This Agreement; No Violations or Conflicts

14

ARTICLE VI

PRE-CLOSING COVENANTS AND AGREEMENTS

15

SECTION 6.1

Conduct of the Company

15

SECTION 6.2

Regulatory Consents, Authorizations, etc.

16

SECTION 6.3

Negotiations with Others

17

SECTION 6.4

Publicity

17

SECTION 6.5

Access

17

SECTION 6.6

Appointment of Officers and Directors

17

SECTION 6.7

Additional Agreements. Amendments or Supplements to Schedules

17

ARTICLE VII

POST-CLOSING COVENANTS

17

SECTION 7.1

Filing of Current Report on Closing Form 8-K and Press Release

17

SECTION 7.2

Filing of Schedule 14F-1

17

SECTION 7.3

Cancellation of Debts

17

SECTION 7.4

Continuation of Consulting Services

18

SECTION 7.5

Capacity of the Continuing Director

18

 

iii 
 

--------------------------------------------------------------------------------

 

 

SECTION 7.6

Non-Competition, Non-Solicitation and Non-Disclosure

18

SECTION 7.7

Further Assurances

19

SECTION 7.8

Directors and Officers

19

SECTION 7.9

Directors and Officers Indemnification

19

SECTION 7.10

Directors Fees

19

ARTICLE VIII

CONDITIONS TO THE CLOSING

20

SECTION 8.1

Conditions to the Closing and the Seller’s Obligation to Sell the Subject Shares

20

SECTION 8.2

Conditions to Closing and the Purchaser’s Obligation to Purchase the Subject
Shares

20

ARTICLE IX

SURVIVAL AND INDEMNIFICATION

22

SECTION 9.1

Survival of Representations and Warranties

22

SECTION 9.2

Obligations of the Purchaser

22

SECTION 9.3

Obligations of the Seller

22

SECTION 9.4

Notice of Loss

22

SECTION 9.5

Defense

22

SECTION 9.6

Notice by the Parties

23

SECTION 9.7

Sole Remedy

23

SECTION 9.8

Maximum Payments; Remedy

23

SECTION 9.9

No Right to Set-Off

23

SECTION 9.10

Limitation of Liability

23

ARTICLE X

TERMINATION, AMENDMENT AND WAIVER

23

SECTION 10.1

Termination

23

SECTION 10.2

Liabilities upon Termination prior to the Closing Date

24

SECTION 10.3

Amendment

24

SECTION 10.4

Waiver

24

ARTICLE XI

MISCELLANEOUS

24

SECTION 11.1

Assignment

24

SECTION 11.2

Non-Waiver

25

SECTION 11.3

Binding Effect; Benefit

25

SECTION 11.4

Notices

25

SECTION 11.5

Governing Law; Venue; Waiver of Trial by Jury

26

SECTION 11.6

Counterparts

26

SECTION 11.7

Facsimile or Email Transmissions

26

SECTION 11.8

Third Party Beneficiaries

26

SECTION 11.9

Headings

26

SECTION 11.10

Severability

26

SECTION 11.11 

Entire Agreement

26

SECTION 11.12

Joint Negotiation and Drafting

26

SECTION 11.13

Fees and Expenses

26

SIGNATURE PAGE

27

 

 

EXHIBITS

 

 

Exhibit A

Rescission Agreement

 

 
iv 

--------------------------------------------------------------------------------

 

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is made and entered into
as of the 4 day of September 2016, by and among Digital Power Corporation, a
California corporation (the “Company”), Philou Ventures, LLC, a Wyoming limited
liability company (the “Purchaser”), and Telkoor Telecom Ltd., an Israeli
corporation (the “Seller”). The Purchaser, the Company and the Seller are at
times collectively referred to herein individually as a “Party” and collectively
as the “Parties.”

 

PREAMBLE

 

WHEREAS, the Seller is the record and beneficial owner of 2,714,610 shares (the
“Subject Shares”) of the common stock, no par value (the “Common Stock”) of the
Company;

 

WHEREAS, the Purchaser desires to purchase the Subject Shares, and the Seller
desires to sell such Subject Shares, upon the terms and subject to the
conditions set forth herein.

 

WHEREAS, the Purchaser has proposed to acquire the Subject Shares pursuant to a
transaction (the “Acquisition”) whereby, pursuant to the terms and subject to
the conditions of this Agreement, the Seller shall sell the Subject Shares to
the Purchaser for an aggregate of $1,500,000 (the “Purchase Price”);

 

WHEREAS, the obligation of the Parties to effect the Acquisition is subject to
the conditions set forth in Article VIII hereof; and

 

WHEREAS, the Parties are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the provisions of
Section 4(a)(1) of the Securities Act of 1933, as amended (the “Securities
Act”).

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations and warranties contained herein, the Parties hereto, intending
to be legally bound, hereby agree as follows:

 

CERTAIN DEFINITIONS

 

Definitions. When used in this Agreement, the following terms shall have the
meanings set forth below (such meanings being equally applicable to both the
singular and plural form of the terms defined):

 

“Affiliate” means, with respect to any person, any other person controlling,
controlled by or under common control with such person. The term “Control” as
used in the preceding sentence means, with respect to a corporation, the right
to exercise, directly or indirectly, more than 10% of the voting rights
attributable to the shares of the controlled corporation and, with respect to
any person other than a corporation, the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of such
person.

 

“Business Day” means any day other than Saturday, Sunday and any day on which
banking institutions in the United States are authorized by law or other
governmental action to close.

 

“Closing” shall have the meaning set forth in Section 2.1.

 

“Closing Date” shall have the meaning set forth in Section 2.1.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Confidential Information” means confidential data and confidential information
relating to the business of the Company (which does not rise to the status of a
Trade Secret under applicable law) that the Seller became aware as a consequence
of or through its relationship with the Company and which has value to the
Company and is not generally known to the competitors of the Company.
Confidential Information shall not include any data or information that (i) has
been voluntarily disclosed to the general public by the Company or its
Affiliates, (ii) has been independently developed and disclosed to the general
public by others, or (iii) otherwise enters the public domain through lawful
means.

 

“Contracts” means any and all contracts, agreements, commitment, franchises,
understandings, arrangements, leases, licenses, registrations, authorizations,
easements, servitudes, rights of way, mortgages, bonds, notes, guaranties,
Encumbrances, evidence of indebtedness, approvals or other instruments or
undertakings to which such person is a party or to which or by which such person
or the property of such person is subject or bound, whether written or oral and
whether or not entered into in the ordinary and usual course of the Person’s
business, excluding any Permits, provided that each such Contract shall provide
for the payment of no less than $5,000.

 

 
 

--------------------------------------------------------------------------------

 

 

“Control Person” means each director, executive officer, promoter, and such
other Persons as may be deemed in control of the Company, as such term is
defined by Rule 405 under the Securities Act.

 

“Damages” means any and all damages, liabilities, obligations, penalties, fines,
judgments, claims, deficiencies, losses, costs, expenses and assessments
(including without limitation income and other taxes, interest, penalties and
attorneys’ and accountants’ fees and disbursements).

 

“Encumbrances” means any and all claims, liabilities and obligations and free
and clear of any and all liens, pledges, charges, mortgages, security interests,
restrictions, leases, licenses, easements, liabilities, claims, encumbrances,
preferences, priorities or rights of others of every kind and description.

 

“Exchange Act” means the Securities and Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

 

“FINRA” means the Financial Industry Regulatory Authority, Inc.

 

“GAAP” means U.S. generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination.

 

“Governmental Authority” means any nation or country (including but not limited
to the United States) and any commonwealth, territory or possession thereof and
any government or governmental or regulatory, legislative, executive authority
thereof, or commission, department or political subdivision thereof, whether
federal, state, regional, municipal, local or foreign, or any department, board,
bureau, agency, instrumentality or authority thereof, or any court or arbitrator
(public or private), including, but not limited to, the Commission and FINRA.

 

“Intellectual Property” means any patent, patent right, trademark, trademark
right, trade name, trade name right, service mark, service mark right, copyright
and other proprietary intellectual property right and computer program.

 

“Knowledge” means, with respect to any Person, (x) such Person is actually aware
of such fact or matter or (y) such Person should reasonably have been expected
to discover or otherwise become aware of such fact or matter after reasonable
investigation, and for purposes hereof it shall be assumed that such Person has
conducted a reasonable investigation of the accuracy of the representations and
warranties set forth herein. With respect to the Seller, the Knowledge of Seller
shall be attributed to Mr. Ben Zion Diamant.

 

“Legal Requirements” means any and all laws (statutory, judicial or otherwise),
ordinances, regulations, judgments, orders, directives, injunctions, writs,
decrees or awards of, and any Contracts with, any Governmental Authority, in
each case as and to the extent applicable to such person or such person’s
business, operations or Properties.

 

“Liability” means any liability, obligation or indebtedness of whatever kind or
nature (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.

 

“Loss” or “Losses” means any and all Liability, damages, fines, fees, penalties
and expenses whether or not arising out of litigation, including without
limitation, interest, reasonable expenses of investigation, court costs,
reasonable out-of-pocket fees and expenses of attorneys, accountants and other
experts or other reasonable out-of-pocket expenses of litigation or other legal
proceedings, incurred in connection with the rightful enforcement of rights
under this Agreement against any Party hereto, and whether or not arising out of
third party claims against an Indemnified Party.

 

“Material Adverse Effect” means any change, event, development, or effect that
is materially adverse to the business, Liabilities, Properties, results of
operations, condition (financial or otherwise) or working capital of the Company
and its Subsidiaries, taken as a whole, as the case may be, or the ability of
the Purchaser or Seller to consummate on a timely basis the Acquisition;
provided, however, that any adverse change in or effect on the business of the
Company and its Subsidiaries, taken as a whole, as the case may be, that is
cured by such Party before the Closing Date shall not be deemed to constitute a
Material Adverse Effect.

 

 
-2-

--------------------------------------------------------------------------------

 

 

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award (in each such case whether preliminary or final).

 

“Permits” means any and all permits, rights, approvals, licenses,
authorizations, legal status, orders or Contracts under any Legal Requirement or
otherwise granted by any Governmental Authority.

 

“Person” means any individual, partnership, joint venture, firm, corporation,
association, limited liability company, trust or other enterprise or any
governmental or political subdivision or any agency, department or
instrumentality thereof.

 

“Principal Exchange” means the OTC QX or the OTC QB (each as operated by the OTC
Markets Group, Inc.), NASDAQ, the NYSE and the NYSE MKT LLC.

 

“Properties” means any and all properties and assets (real, personal or mixed,
tangible or intangible) owned or used by the Company.

 

“Purchase Right” with respect to any Person means any security, right,
subscription, warrant, option or other Contract that gives the right to purchase
or otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person.

 

“Records” means all originals and copies of agreements, instruments, documents,
deeds, books, records, files, corporate franchises, stock record books,
corporate books containing the minutes of meetings of directors and shareholders
and any and all other data and information within the possession of a Party or
any Affiliate thereof.

 

“SEC Reports” means all reports required to be filed by the Company with the
Commission pursuant to the Securities Act and the Exchange Act.

 

“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.

 

“SIPC” means the Securities Investor Protection Corporation.

 

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association, or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons own a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or shall
be or control any managing director or general partner of such business entity
(other than a corporation). The term “Subsidiary” shall include all Subsidiaries
of such Subsidiary.

 

“Tax” means any and all taxes, charges, fees, levies or other assessments,
including, without limitation, local and/or foreign income, net worth, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, share capital,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, service, service use,
transfer, registration, recording, ad-valorem, value-added, alternative or
add-on minimum, estimated, or other taxes, assessments or charges of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.

 

“Tax Return” means any federal, state, local and foreign tax return, report or
similar statement required to be filed with respect to any Tax (including any
attached Schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.

 

“Taxing Authority” means the Internal Revenue Service and any other Governmental
Authority responsible for the administration of any Tax.

 

 
-3-

--------------------------------------------------------------------------------

 

 

“Trade Secrets” means information of the Company including, but not limited to,
technical or nontechnical data, formulas, patterns, compilations, programs,
financial data, financial plans, product or service plans or lists of actual or
potential customers or suppliers which (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.

 

“Transactions” means the transactions contemplated by this Agreement.

 

“Uncured Inaccuracy” with respect to a representation or warranty of a party to
the Agreement as of a particular date shall be deemed to exist only if such
representation or warranty shall be inaccurate as of such date as if such
representation or warranty were made as of such date, and the inaccuracy in such
representation or warranty shall not have been cured since such date; provided,
however, that if such representation or warranty by its terms speaks as of the
date of the Agreement or as of another specific date, then there shall not be
deemed to be an Uncured Inaccuracy in such representation or warranty unless
such representation or warranty shall have been inaccurate as of the date of the
Agreement or such other specific date, respectively, and the inaccuracy in such
representation or warranty shall not have been cured since such date.

 

Recitals. The above WHEREAS clauses are hereby incorporated by reference into
this Agreement as if fully stated herein.

 

Construction and Interpretation. Unless the context of this Agreement otherwise
requires, (i) words of any gender include the other gender; (ii) words using the
singular or plural number also include the plural or singular number,
respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or
similar words refer to this entire Agreement; (iv) the terms “Article” or
“Section” refer to the specified Article or Section of this Agreement; and (v)
the word “including” does not imply any limitation to the item or matter
mentioned.

 

ARTICLE I

THE ACQUISITION

 

1.1     The Acquisition. Subject to the terms and conditions of this Agreement,
at the Closing, the Seller hereby agrees to transfer, convey, assign, set over
and deliver to the Purchaser with full title guarantee, and the Purchaser shall
acquire and accept from the Seller (the “Acquisition”), all and not less than
all of the Subject Shares held by it free and clear of all Encumbrances, in
exchange for the delivery by the Purchaser to the Seller of the Purchase Price.
The Seller does hereby waive all rights of pre-emption, other restrictions on
transfer and rights of veto or otherwise, which have or may have been conferred
on it, or otherwise, in respect of the transfer of the Subject Shares to the
Purchaser under this Agreement.

 

1.2     Payment Terms. Payment of the Purchase Price shall be made by wire
transfer of immediately available funds in accordance with the letter from
Daniel B. Eng, Esq. dated the date hereof ("Letter").

 

1.3     Delivery of Subject Shares. On or before the Closing, the Seller shall
deliver to Mr. Daniel B Eng the certificate(s) evidencing all of the Subject
Shares including those currently held in electronic or “Book Entry” form
(collectively, the “Certificate”), accompanied by duly executed and medallion
guaranteed stock powers transferring such Subject Shares to the Purchaser and
otherwise in good form for transfer.

 

ARTICLE II

CLOSING

 

2.1     Closing. The closing of the Acquisition (the “Closing”) shall take place
at the offices of Daniel B Eng not later than five days after all of the
conditions to closing specified in this Agreement (other than those conditions
requiring the execution or delivery of a document or the taking of some action
at the Closing) have been fulfilled or waived by the Party entitled to waive
that condition; provided, however, that (a) the Parties shall use their best
efforts to effect the Closing by September 30, 2016, and (b) the Closing may
take place by facsimile (to the extent applicable) or other means as may be
mutually agreed upon in advance by the Parties. The date on which the Closing is
held is referred to in this Agreement as the “Closing Date.”

 

 
-4-

--------------------------------------------------------------------------------

 

 

The Escrowed Deliverables shall be released to Seller and the Purchaser pursuant
to and in accordance with the Letter. In the event that the Closing for the sale
of the Subject Shares has not occurred for any reason within five (5) Business
Days of the date of the receipt of the documents and deliverables referred to in
Sections 2.2, 2.3 and 2.4 below (collectively, the “Escrowed Deliverables”) by
Daniel B. Eng, Esq. Daniel B Eng, Esq. shall return the Escrowed Deliverables as
more specifically set forth in the Letter.

 

2.2     Deliveries at Closing by the Seller. At the Closing, subject to the
terms and conditions of this Agreement, the Seller shall execute and deliver or
cause to be executed and delivered to Daniel B. Eng, Esq for the benefit of the
Purchaser:

 

(a)     The Certificate, as described above;

 

(b)     The Seller’s Certificate;

 

(c)     Executed but undated letters of resignation from all current members of
the Board of Directors of the Company except the Continuing Director; and

 

(d)     Such other documents as may be reasonably requested by the Purchaser and
necessary to effect the Closing.

 

2.3     Deliveries at Closing by the Purchaser. At the Closing, subject to the
terms and conditions of this Agreement, the Purchaser shall execute and deliver
or cause to be executed and delivered to Daniel B. Eng, Esq for the benefit of
the Seller:

 

(a)     The Purchase Price; and

 

(b)     Such other documents as may be reasonably requested by the Seller and
necessary to effect the Closing.

 

2.4     Deliveries at Closing by the Company. At the Closing, subject to the
terms and conditions of this Agreement, the Company shall execute and deliver or
cause to be executed and delivered to Daniel B. Eng, Esq for the benefit of the
Purchaser:

 

(a)     The Officer’s Certificate;

 

(b)     The Secretary’s Certificate; and

 

(c)     Such other documents as may be reasonably requested by the Purchaser and
necessary to effect the Closing.

 

2.5     The Company’s Board of Directors.

 

(a)     As soon as reasonably practicable after the Closing Date, the Company
shall, upon the Purchaser’s request, take all actions as are necessary or
desirable to enable the four (4) designees of the Purchaser (the “Purchaser
Designees”) to be so elected or designated to the board of directors of the
Company, including promptly filling vacancies or newly created directorships on
the board of directors of the Company and/or promptly securing the resignations
of all but Amos Kohn, who will serve as the Company’s incumbent director, and
shall cause the Purchaser Designees to be so elected or designated at such time
(such member of the board of directors of the Company immediately prior to any
the Purchaser Designees joining the board of directors of the Company who
remains on the board of directors of the Company after the Purchaser Designees
join the board of directors of the Company, the “Continuing Director”). As soon
as reasonably practicable after the Closing Date, the Company shall also, upon
the Purchaser’s request, cause the Purchaser Designees to serve on and
constitute the same percentage (rounded up to the next whole number) as is on
the board of directors of the Company of (i) each committee of the board of
directors of the Company, (ii) each board of directors (or similar body) of each
Subsidiary of the Company and (iii) each committee (or similar body) of each
such board, in each case to the extent permitted by applicable Legal
Requirements.

 

(b)     The Company’s obligations to appoint the Purchaser Designees to the
board of directors of the Company shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly
take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section 2.5, including mailing to the
Company’s shareholders any information required by Section 14(f) and Rule 14f-1
to enable the Purchaser Designees to be elected or designated to the board of
directors of the Company at the time or times contemplated by this Section 2.5.
The Purchaser shall supply or cause to be supplied to the Company any
information with respect to the Purchaser, its officers, directors and
Affiliates, and the proposed Purchaser Designees to the board of directors of
the Company required by Section 14(f) and Rule 14f-1.

 

 
-5-

--------------------------------------------------------------------------------

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER

 

The Company and the Seller hereby jointly and severally represent and warrant to
the Purchaser as of the date hereof and as of the Closing Date that:

 

 

3.1     Corporate Organization. The Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and has full corporate power and authority to carry on its business as it is now
being conducted and to own the Properties it now owns, and (ii) is duly
qualified or licensed to do business as a foreign corporation in good standing
in such other states in which it does business, except where such failure to be
so qualified or licensed would not have a Material Adverse Effect on the
Company’s business; the Company is duly and properly registered pursuant to
applicable state laws and regulations in all states where the conduct of the
Company’s business as presently conducted requires such registration. The copies
of the Articles of Incorporation and Bylaws of the Company (the “Charter
Documents”) annexed hereto as Schedule 3.1 are complete and correct copies of
such instruments as presently in effect.

 

3.2     Authority. The Company has the corporate power and the authority to
execute, deliver and perform this Agreement and each other document contemplated
by this Agreement (the “Transaction Documents”). The execution, delivery and
performance of this Agreement by the Company have been duly authorized by its
board of directors. No other corporate proceedings on the part of the Company
are necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by the Company
and, assuming due execution and delivery hereof by the Purchaser, is a valid and
legally binding agreement of the Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, moratorium, reorganization and similar
laws of general applicability relating to or affecting creditors’ rights, to
general equity principles, and public policy considerations underlying the
securities laws, to the extent that such public policy considerations limit the
enforceability of the provisions of this Agreement that purport to provide
indemnification for securities laws liabilities.

 

3.3     Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of (i) 30,000,000 shares of Common Stock and (ii) 2,000,000
shares of preferred stock, no par value per share (the “Preferred Stock”), of
which (A) 500,000 of such shares have been designated Series A Redeemable
Convertible Preferred shares, and (B) 1,500,000 of such shares constitute “blank
check” Preferred Stock. As of the date hereof (i) 6,775,971 shares of Common
Stock are issued and outstanding, (ii) no shares of Common Stock are held by the
Company in its treasury, and (iii) no shares of Preferred Stock are issued or
outstanding. After giving effect to the acquisition of the Subject Shares by the
Purchaser in the Acquisition(assuming no exercises of stock options), the
Company will continue to have 6,775,971 shares of the Company Common Stock
issued and outstanding, of which (i) the 2,714,610 Subject Shares will be owned
by the Purchaser, which shares will constitute approximately 40.06% of the
issued and outstanding Common Stock (34.4% on fully diluted basis) and (ii)
4,061,361 shares of Common Stock will be owned by its present shareholders,
which shares will constitute approximately 59.94% (65.6% on fully diluted basis)
of the issued and outstanding Common Stock. As of June 30, 2016 there were
outstanding 1,106,000 options exercisable for Company Common Stock.

 

Other than as set forth above, no shares of capital stock or other voting or
non-voting securities of the Company are issued, reserved for issuance or
outstanding. All outstanding shares of the capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable and not subject to or
issued in violation of any Purchase Right, right of first refusal, preemptive
right, subscription right or any similar right under any provision of the
applicable corporate laws of the State of California, the Charter Documents, or
any Contract to which the Company is a party or otherwise bound. Except as set
forth on Schedule 3.3, there are no oral and/or written, direct and/or indirect
options, warrants, rights, convertible or exchangeable securities, “phantom”
stock rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to which the
Company is a party or by which it is bound; (a) obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity interests in, or any security convertible or
exercisable for or exchangeable into any capital stock of or other equity
interest in, the Company, (b) obligating the Company to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking or (c) that give any Person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights occurring to holders of the capital stock of the Company. As
of the date of this Agreement, there are no outstanding contractual obligations
of the Company to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company. To the Company’s Knowledge, the offer and sale of all
capital stock, convertible securities, rights, warrants, or options of the
Company issued prior to the Closing complied with all applicable federal and
state securities laws and the Company has not been notified by the Commission,
the NYSE MKT LLC, FINRA, any state securities commission or any other
Governmental Authority of the absence of compliance by the Company with any
federal and state securities laws or other Legal Requirements. No stockholder
has a matured and/or unmatured right of rescission or claim for damages with
respect thereto.

 

 
-6-

--------------------------------------------------------------------------------

 

 

3.4     Consents; Permits; Defaults. Assuming the accuracy of the
representations and warranties of the Purchaser in Section 4, other than as
contemplated in this Agreement, none of the execution, delivery or performance
of this Agreement by the Company, the consummation by the Seller of the
Acquisition or any other transaction contemplated by this Agreement, or
compliance by the Company with any of the provisions of this Agreement will
require (with or without notice or lapse of time, or both) any consent,
approval, authorization or permit of, or filing or registration with or
notification to, any Governmental Authority or any other Person, other than the
failure to obtain such consents, approvals, authorizations or permits of, or to
make such filings, registrations with or notifications to any Governmental
Authority or any other Person, individually or in the aggregate, has not had a
Material Adverse Effect on the Company.

 

3.5     Non-Contravention. The execution, delivery and performance of this
Agreement and the Transaction Documents by the Company does not and will not (i)
result in a breach of, or constitute a default under the Charter Documents, (ii)
result in a breach of, or constitute a default under, any loan agreement,
indenture or mortgage or any material lease, agreement, franchise, license,
permit or other undertaking or Contract to which the Company is a party or any
of its Properties may be subject or bound, (iii) result in a violation of any
order, writ, injunction, decree or award of any court or Governmental Authority
including, but not limited to, the Commission, to the Company or relating to any
of its Properties, or (iv) result in a violation of any federal or state law,
statute, ordinance, rule or regulation or other Legal Requirement applicable the
Company.

 

3.6     Financial Statements.

 

(a)     The Company has delivered or made available (for purposes of this
section, filings that are publicly available prior to the date hereof on the
EDGAR system of the SEC under the name of the Company are deemed to have been
made available) to the Purchaser: (i) a true and complete copy of the Company’s
unaudited consolidated balance sheet as of June 30, 2016 (the “Balance Sheet
Date”) and the related unaudited consolidated statements of operations, changes
in the Company stockholder’s deficit and cash flows for the three month period
then ended and (ii) a true and complete copy of the Company’s audited balance
sheet as of December 31, 2015 and December 31, 2014 and the related audited
statements of operations, changes in the Company stockholder’s deficit and cash
flows for each of the years ended December 31, 2015, December 31, 2014 and
December 31, 2013, prepared in accordance with GAAP, together with the report of
Kost Forer Gabbay & Kasierer, the Company’s independent registered public
accounting firm (the “Firm”), which has served as the Company’s auditors since
the audit of its 2002 financial statements (such statements, including the
related notes and schedules thereto, are referred to herein as the “GAAP
Financial Statements”). The GAAP Financial Statements have been prepared from,
are in accordance with, and accurately reflect, the books and records of the
Company, comply in all material respects with applicable accounting requirements
in the case of the GAAP Financial Statements; fairly present in all material
respects the financial position and the results of operations and cash flows
(and changes in financial position, if any) of the Company as of the times and
for the periods referred to therein (subject, in the case of unaudited
statements, to normally recurring year-end adjustments that are not material
either individually or in the aggregate and the absence of footnotes). The GAAP
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as set forth in the notes
thereto). The GAAP Financial Statements are in form appropriate for filing with
the Commission.

 

(b)     The Firm, which has certified the Purchaser’s GAAP Financial Statements
and related schedules, is an independent registered public accounting firm with
respect to the Purchaser as required by the Securities Act and the rules and
regulations promulgated thereunder and the Public Company Accounting Oversight
Board (United States).

 

(c)     There are no relationships or services, or any other factors that may
affect the objectivity and independence of the Firm under applicable auditing
standards. The Firm has not performed any non-audit services for any Person
related to the Company.

 

3.7     Contracts.

 

(a)     Schedule 3.7(a) contains an accurate and complete list and terms of all
the Company’s Contracts. Other than as set forth on Schedule 3.7(a), the Company
is not a party to or bound by any of the following, whether written or oral:

 

(i)     Any Contract that cannot by its terms be terminated by the Company with
30 days’ or less notice without penalty or whose term continues beyond one year
after the date of this Agreement;

 

(ii)     Any Contract or commitment for capital expenditures for non-product
orders by the Company in excess of $25,000 per calendar quarter in the aggregate
other than purchase order to vendors to manufacture products sold to customers;

 

 
-7-

--------------------------------------------------------------------------------

 

 

(iii)     Any lease or license with respect to any material Properties, whether
as landlord, tenant, licensor or licensee;

 

(iv)     Any Contract or other instrument relating to the borrowing of money or
the guarantee of any obligation or the deferred payment of the purchase price of
any Properties;

 

(v)     Any Contract with any Affiliate of the Company relating to the provision
of goods or services by or to the Company other than purchase orders to vendors
to manufacture products sold to customers;

 

(vi)     Any Contract for the sale of any assets;

 

(vii)     Any Contract that purports to limit the Company’s freedom to compete
freely in any line of business or in any geographic area;

 

(viii)     Any preferential purchase right, right of first refusal, or similar
agreement; or

 

(ix)     Any other Contract that is material to the business of the Company.

(b)     All of the Contracts listed or required to be listed in Schedule 3.7(a)
are valid, binding and to the Knowledge of Seller, in full force and effect, and
the Company has not been notified or advised by any party thereto of such
party’s intention or desire to terminate or modify any such Contract in any
respect. Neither the Company nor, to the Knowledge of the Company and Seller,
any other party is in breach of any of the terms or covenants of any Contract
listed or required to be listed on Schedule 3.7(a) that has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Following the Closing, the Company will continue to be entitled
to all of the benefits currently held by the Company under each Contract listed
or required to be listed on Schedule 3.7(a).

 

(c)     The Company is not a party to or bound by any Contract or Contracts the
terms of which were arrived at by, or otherwise reflect, less-than-arm’s-length
negotiations or bargaining.

 

3.8     Absence of Certain Changes or Events.

 

(a)     Except as set forth on Schedule 3.8(a), since December 31, 2015 (the
“Applicable Date”), there has not been:

 

(i)     any event, circumstance or change that had or would reasonably be
expected to result in a Material Adverse Effect on the Company;

 

(ii)     any damage, destruction or loss (whether or not covered by insurance)
that had or would reasonably be expected to result in a Material Adverse Effect
of the Company; or

 

(iii)     any Material Adverse Effect in the Company’s sales patterns, pricing
policies, accounts receivable or accounts payable.

 

(b)     Except as set forth on Schedule 3.8(b), since the Applicable Date, the
Company has not:

 

(i)     merged into or with or consolidated with, any other corporation or
acquired the business or assets of any Person;

 

(ii)     purchased any securities of any Person;

 

(iii)     created, incurred, assumed, guaranteed or otherwise become liable or
obligated with respect to any Liabilities, or made any loan or advance to, or
any investment in, any person, except in each case in the ordinary course of
business;

 

(iv)     made any change in any existing election, or made any new election,
with respect to any tax law in any jurisdiction which election could have an
effect on the tax treatment of the Company or the Company’s business operations;

 

 
-8-

--------------------------------------------------------------------------------

 

 

(v)     entered into, amended or terminated a material Contract;

 

(vi)     sold, transferred, leased, mortgaged, encumbered or otherwise disposed
of, or agreed to sell, transfer, lease, mortgage, encumber or otherwise dispose
of, any Properties;

 

(vii)     settled any claim or litigation, or filed any motions, orders, briefs
or settlement agreements in any proceeding before any Governmental Authority or
any arbitrator;

 

(viii)     incurred or approved, or entered into any Contract, agreement or
commitment to make, any expenditures in excess of $25,000;

 

(ix)     maintained its Records and/or any other books of account other than in
the usual, regular and ordinary manner in accordance with GAAP and on a basis
consistent with prior periods and has not made any change in any of its
accounting methods or practices that would be required to be disclosed under
GAAP;

 

(x)     granted any increase in the compensation payable or to become payable to
directors, officers or employees (including, without limitation, any such
increase pursuant to any bonus, profit-sharing or other plan or commitment);

 

(xi)     suffered any extraordinary losses or waived any rights of material
value;

 

(xii)     made any payment to any Affiliate or forgiven any indebtedness due or
owing from any Affiliate to the Company other than director fees and other
payments described in the SEC Reports;

 

(xiii)     engaged in any one or more activities or transactions with an
Affiliate outside the ordinary course of business;

 

(xiv)     declared, set aside or paid any dividends, or made any distributions
or other payments in respect of its equity securities, or repurchased, redeemed
or otherwise acquired any such securities;

 

(xv)     amended its Charter Documents;

 

(xvi)     issued any capital stock or other securities, or granted, or entered
into any agreement to grant, any options, convertible rights, other rights,
warrants, calls or agreements relating to its capital stock; or

 

(xvii)     agreed or committed to do any of the foregoing.

 

3.9     Absence of Undisclosed Liabilities and Agreements. The Company does not
have any debt, loss, damage, adverse claim, liability or obligation (whether
direct or indirect, known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due, and whether in contract, tort, strict liability or otherwise) which
are not accurately reflected or provided for in the balance sheet dated as of
the Balance Sheet Date included within the GAAP Financial Statements (whether or
not they are required to be disclosed under GAAP), other than (a) those incurred
in the ordinary course of the Company’s business since Applicable Date, (b)
those disclosed in this Agreement or the disclosure schedules and (c) those
material obligations arising subsequent to the date hereof pursuant to the
express terms of executory Contracts, which executory Contracts (to the extent
such Contracts are material to the business of the Company) are identified on
Schedule 3.9. Neither the Company nor any of its officers or directors has
effected any securitization transactions or “off-balance sheet arrangements” (as
defined in Item 303(c) of Regulations S-K of the Commission) since the Balance
Sheet Date. Except as set forth on Schedule 3.9 or otherwise contemplated by
this Agreement, as of the Closing there will be no Liabilities of the Company.

 

3.10     Compliance with Law. The business of the Company has been operated in
compliance with all Legal Requirements, including all laws, ordinances, rules,
regulations and orders of all Governmental Authorities and the NYSE MKT LLC,
except where such failure would not have a Material Adverse Effect on the
Company or its business. The Company has filed all reports and statements,
including but not limited to the SEC Reports, together with any amendments
required to be made with respect thereto, that it was required to file with any
Governmental Authority or any other body having jurisdiction over the Company’s
operations. The Company has not received any written communication from a
Governmental Authority that alleges that the Company is not in compliance with
any federal, state, local or foreign laws, ordinances and regulations or has not
made all of the filings required by all such authorities, organizations and
agencies.

 

 
-9-

--------------------------------------------------------------------------------

 

 

3.11     Tax Matters. All Tax Returns required to be filed by or on behalf of
the Company have been duly and timely filed with the appropriate Taxing
Authority in all jurisdictions in which such Tax Returns are required to be
filed (after giving effect to any valid extensions of time in which to make such
filings), and all such Tax Returns are true, complete and correct in all
material respects. All Taxes payable by or on behalf of the Company (whether or
not shown on any Tax Return) have been fully and timely paid. With respect to
any period for which Tax Returns have not yet been filed or for which Taxes are
not yet due or owing, the Company has made due and sufficient accruals for such
Taxes in the GAAP Financial Statements and in its books and records. All
required estimated Tax payments sufficient to avoid any underpayment penalties
or interest have been made by or on behalf of the Company. The Company has
complied in all material respects with all applicable Laws relating to the
payment and withholding of Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, equity owner or other third party
and has duly and timely withheld and paid over to the appropriate Taxing
Authority all amounts required to be so withheld and paid under all applicable
Laws.

 

3.12     Absence of Questionable Payments. Neither the Company nor any
Affiliate, director, officer, partner, employee, agent, representative or other
Person acting on behalf of the Company has: (i) used any funds for
contributions, payments, gifts or entertainment, or made any expenditures
relating to political activities of foreign, federal, state or local government
officials or others in violation of any Law (including the Foreign Corrupt
Practices Act of 1977, as amended), or (ii) accepted or received any unlawful
contributions, payments, gifts or expenditures.

 

3.13     Litigation. There is no claim, action, suit or proceeding pending or,
to the Knowledge of either the Company and Seller, threatened against any of the
Company or its Properties which, if adversely determined, will affect or can
reasonably be expected to affect materially and adversely, the Company, or which
seeks to prohibit, restrict or delay consummation of the Transactions or any of
the conditions to consummation of such transaction, nor to the Knowledge of the
Company is there any judgment, decree, injunction, ruling or order of any court,
Governmental Authority, including, but not limited to, the Commission, any
commission, agency or instrumentality or arbitrator outstanding against the
Company having, or which may in the future have, any such effect. Neither the
Company nor any Affiliate thereof is under investigation with respect to, any
violation of any provision of any federal or state law or administrative
regulation in respect of the business of the Company. The Company is not a party
to or bound by any judgment, decree, injunction, ruling or order of any
Governmental Authority or any other person which has affected or may affect
materially and adversely the Subject Shares.

 

3.14     Title to Property.

 

(a)     Personal Property. All material items of personal property used in the
business of the Company are in good operating condition and fit for operation in
the ordinary course of the Company’s business (subject to normal wear and tear)
with no defects that could reasonably be expected to interfere with the conduct
of the normal operation of such items and are suitable for the purposes for
which they are currently being used.

 

(b)     Real Property. The Company owns no real property. The Company’s only
leased property are the properties in Fremont, California and Salisbury, the
United Kingdom (collectively, the “Leased Property”). All real estate Taxes for
which the Company is responsible with respect to any Leased Property (and which
are not otherwise incorporated into payments made under any lease), have been
paid in full, as and when due.

 

3.15     Intellectual Property. The Company has, or has rights to use, all
Intellectual Property necessary for the conduct of the business of the Company
as currently conducted. The Company has received no written notice that the
Intellectual Property used by it violates or infringes upon the rights of any
Person. All rights to such Intellectual Property are enforceable and to the
Knowledge of the Seller and the Company, there is no existing infringement by
another Person of any of the rights to the Company’s Intellectual Property of
others. All the Company’s Intellectual Property rights registered or applied for
registration under the name of the Company are set forth on Schedule 3.15.

 

3.16     Absence of Certain Business Practices. Neither the Company nor any
other Affiliate or agent of the Company, or any other person acting on behalf of
or associated with the Company, acting alone or together, has (a) received,
directly or indirectly, any rebates, payments, commissions, promotional
allowances or any other economic benefits, regardless of their nature or type,
from any customer, supplier, employee or agent of any customer or supplier of
the Company; or (b) directly or indirectly given or agreed to give any money,
gift or similar benefit to any customer, supplier, employee or agent of any
customer or supplier, any official or employee of any government (domestic or
foreign), or other person who was, is or may be in a position to help or hinder
the business of the Company (or assist the Company in connection with any actual
or proposed transaction), in each case which (i) may subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, may have had an adverse effect on the
business, financial condition, operations or prospects of the Company, or (iii)
if not continued in the future, may adversely affect the business, financial
condition, operations or prospects of the Purchaser.

 

 
-10-

--------------------------------------------------------------------------------

 

 

3.17     Transactions with Affiliates. Except as set forth on Schedule 3.17, the
Company has not purchased, acquired or leased any Property or services from, or
sold, transferred or leased any Property or services to, or loaned or advanced
any money to, or borrowed any money from, or entered into or been subject to any
management, consulting or similar agreement with, or engaged in any other
significant transaction with any officer, director or shareholder of the Company
or any of their respective Affiliates. No Affiliate of the Company is indebted
to the Company for money borrowed or other loans or advances, and the Company is
not indebted to any such Affiliate.

 

3.18     Absence of Certain Control Person Actions or Events. To the Company’s
Knowledge, none of the following has occurred during the past three (3) years
with respect to a Control Person:

(a)     A petition under the federal bankruptcy laws or any provincial or state
insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or Property of such Control
Person, or any partnership in which he was a general partner at or within two
(2) years before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years before
the time of such filing;

 

(b)     Such Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses);

 

(c)     Such Control Person was the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, his engagement in (A) any type of business practice, or (B) any
activity in connection with the purchase or sale of any security or commodity or
in connection with any violation of federal or state securities laws or federal
commodities laws;

 

(d)     Such Control Person was the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than sixty (60)
days the right of such Control Person to engage in any activity described in
paragraph (c) of this item, or to be associated with Persons engaged in any such
activity; or

 

(e)     Such Control Person was found by a court of competent jurisdiction in a
civil action or by the Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended, or vacated.

 

3.19     SEC Reports. The Company has filed with the Commission all SEC Reports
required to be filed pursuant to the Securities Act and Exchange Act and is
current in its reporting obligations. As of their respective dates, all SEC
Reports complied in all material respects with requirements of the Securities
Act and Exchange Act and the rules and regulations promulgated thereunder and
none of the SEC Reports when they were filed contained an untrue statement of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

 

3.20     Books and Records; Internal Accounting Controls. The Records of the
Company accurately reflect in all material respects the information relating to
the business of the Company, the location and collection of its Properties and
the nature of all transactions giving rise to the obligations or accounts
receivable of the Company to the extent required to be contained therein. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions is taken with respect to any
differences. All such Records relating to internal accounting controls are
appended to, and a description of the internal accounting controls is listed on,
Schedule 3.20.

 

3.21     Broker. Except as specified in Schedule 3.21, the Company has not
retained any broker in connection with any transaction contemplated by this
Agreement. The Company shall not be obligated to pay any fee or commission
associated with the retention or engagement by the Company of any broker in
connection with any transaction contemplated by this Agreement.

 

3.22     Common Stock Symbol. The Company Common Stock is currently listed on
the NYSE MKT LLC under the symbol “DPW.”

 

 
-11-

--------------------------------------------------------------------------------

 

 

3.23     No Commission or NYSE MKT Inquiries; Delisting. Except as set forth on
Schedule 3.23(a), to the best of the Company’s Knowledge, the Company is not,
and has never been, the subject of any formal or informal inquiry or
investigation by the Commission or the NYSE MKT. Except as set forth on Schedule
3.23(b), the Company has no Knowledge of any action by the Commission or the
NYSE MKT that seeks to deregister or delist the Common Stock from the NYSE MKT
or otherwise render such shares ineligible for listing and trading on the NYSE
MKT.

 

3.24     Disclosure of Material Information. Neither the Company nor any other
Person acting on its behalf, including the Seller, has provided or will provide
the Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information (other than with respect to
the Transactions). The Company and the Seller understand and confirm that the
Purchaser will be relying on the foregoing representations in effecting
transactions in securities of the Company.

3.25     Labor Matters. The Company is not a party to any representation or
collective bargaining agreement with any employees.

 

3.26     Employment Agreements and Plans. The Company has furnished the
Purchaser with a list of all employment, consulting, advisory and
confidentiality agreements to which the Company is a party. The Company has
delivered to the Purchaser true and complete copies of each such agreement (or
written descriptions thereof for any such agreements which are not in writing).
Except as set forth on Schedule 3.26, the Company has not and does not maintain
or contribute to any outstanding incentive compensation, deferred compensation,
profit sharing, stock option, stock bonus, stock purchase, savings, consultant,
retirement, pension, medical, dental, disability or other benefit plans or
arrangements with or for the benefit of any officer, employee or former officer,
employee of the Company or for the benefit of any distributor, sales
representative or other person resulting from a relationship with the Company.

 

3.27     Insurance. The Company has furnished the Purchaser with a list of all
material bonds and liability, fire and other insurance contracts of whatsoever
description to which the Company is a party, and under which the Company is or
was a beneficiary.

 

3.28     Subject Shares. The Subject Shares, when originally issued, were duly
authorized, fully paid and non-assessable and vested in the holder thereof free
and clear of any restrictions on transfer (other than any restrictions under
applicable state or federal securities laws), Taxes, Encumbrances, options,
warrants, Purchase Rights, Contracts, commitments, equities, claims, and demands
and neither were nor are subject to any pre-emptive or other similar rights.

 

3.29     Director and Officer Insurance. The Company has maintained insurance
for their officers and directors for the last five (5) years without any lapse
in coverage. As of the Closing Date, no claims have been filed against any
officer or director of the Company.

 

3.30     Prior Sales of Securities. All prior sales of securities by the Company
were either properly registered under the federal and/or state securities laws
or issued pursuant to an exemption therefrom and all such sales were all done in
compliance with all Legal Requirements and no Person/entity has any rescission
and/or similar rights with respect to the Subject Shares.

 

3.31     DTC Eligibility. The Company’s transfer agent is a participant in and
the Common Stock is eligible for transfer pursuant to the Depository Trust
Company’ Fast Automated Securities Transfer Program.

 

3.32     No Subsidiaries. The Company has no Subsidiaries other than Digital
Power Limited (“DPL”).

 

3.33     Disclosure. No representation or warranty by the Company or the Seller
in this Agreement, the Exhibits or the Schedules hereto and thereto and no
statement contained in any document, certificate, or other writing furnished or
to be furnished by the Company and/or the Seller to the Purchaser or any of its
representatives or agents pursuant to the provisions hereof or in connection
with the Transactions, contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary in order to make
the statements herein or therein made, in the light of the circumstances under
which they were made, not misleading.

 

 
-12-

--------------------------------------------------------------------------------

 

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser hereby represents and warrants to the Seller as of the date hereof
and as of the Closing Date that:

 

4.1     Authority. The Purchaser has all necessary company power and company
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby, including the
Acquisition. The execution and delivery of this Agreement by the Purchaser, and
the consummation by the Purchaser of the Transactions contemplated hereby,
including the Acquisition, have been duly and validly authorized by all
necessary company action, and no other company proceedings on the part of the
Purchaser are necessary to authorize this Agreement or to consummate the
Transactions contemplated hereby. This Agreement has been duly validly executed
and delivered by the Purchaser and, assuming due authorization, execution and
delivery by the Company and the Seller, constitutes a legally valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar Laws affecting creditors’ rights generally and subject to the
effect of general principles of equity, whether considered in a proceeding in
equity or at law).

 

4.2     No Conflict. None of the execution, delivery or performance of this
Agreement by the Purchaser, the consummation by the Purchaser of the Acquisition
or any other transaction contemplated by this Agreement, or compliance by the
Purchaser with any of the provisions of this Agreement will (with or without
notice or lapse of time, or both): (a) conflict with or violate any provision of
the organizational or governing documents of the Purchaser, or (b) assuming that
all consents, approvals, authorizations and permits described in Section 3.4
have been obtained and all filings and notifications described in Section 3.4
have been made and any waiting periods thereunder have terminated or expired,
conflict with or violate any Law applicable to the Purchaser, except, with
respect to clause (b), for any such conflicts, violations, consents, breaches,
losses, defaults, other occurrences which, individually or in the aggregate,
have not had a Material Adverse Effect on the Purchaser.

 

4.3     Information in the Form 8-K. The information supplied by the Purchaser
in writing expressly for inclusion or incorporation by reference in the Form 8-K
(as hereinafter defined) and any amendment thereof or supplement thereto, will
not, on the date filed with the Commission, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading.

 

4.4     Securities Act Representations.

 

(a)     Restricted Shares. The Purchaser represents that it understands that the
Subject Shares to be sold to it in the Acquisition will not be registered
pursuant to the registration requirements of the Securities Act (as hereinafter
defined) and that the resale of such Subject Shares is subject to certain
restrictions hereunder and under federal and state securities laws. The
Purchaser represents that it is acquiring such Subject Shares for its own
account, not as a nominee or agent, and not with a view to the distribution
thereof in violation of applicable securities laws. Such Party further
represents that it has been advised and understands that since such Subject
Shares have not been registered under the Securities Act, such Subject Shares
must be held indefinitely unless (A) the resale of such Subject Shares has been
registered under the Securities Act, (B) a sale of such Subject Shares is made
in conformity with the holding period, volume and other limitations of Rule 144
promulgated by the SEC under the Securities Act, or (C) in the opinion of
counsel reasonably acceptable to the Company, some other exemption from
registration is available with respect to any proposed sale, transfer or other
disposition of such Subject Shares.

  

(b)     Legend. The Purchaser represents that it has been advised and
understands that, subject to applicable securities laws, stop transfer
instructions will be given to the Company’s transfer agent with respect to the
Subject Shares and that a legend setting forth the following restrictions on
transfer will be set forth on the certificates for the Subject Shares or any
substitutions therefor:

 

“THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE. NEITHER THE SHARES EVIDENCED BY THIS CERTIFICATE
NOR ANY INTEREST THEREIN MAY BE SOLD OR OTHERWISE PLEDGED, HYPOTHECATED OR
TRANSFERRED IN THE ABSENCE OF (i) REGISTRATION UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR (ii) A VALID EXEMPTION
THEREFROM.”

 

(c)     Accredited Investor. The Purchaser is an “accredited investor” (as such
term is defined in Regulation D under the Securities Act).

 

 
-13-

--------------------------------------------------------------------------------

 

 

(d)     Funds. On the Closing Date, the Purchaser will have sufficient funds to
pay the Purchase Price.

 

(e)     Litigation. There are no actions, suits, arbitrations, mediations,
proceedings or claims pending or, to the knowledge of the Purchaser, threatened
against Purchaser that seek to restrain or enjoin the consummation of the
Acquisition or the other transactions contemplated hereby.

 

(f)     Acknowledgement of Receipt of Information. Purchaser has had an
opportunity to ask questions and receive answers and materials, and to discuss
the business of the Company and its Subsidiaries and related matters, with
certain key officers of the Company and its Subsidiaries regarding the
transactions contemplated hereunder (the “Investigation”). Purchaser hereby
acknowledges and agrees that other than the Company’s representations and
warranties set forth in Article III and the Seller's representations and
warranties set forth in Article V hereof, none of the Company or the Seller or
any of their representatives make or have made any representation or warranty,
express or implied, at Law or in equity, with respect to the business of the
Company or any Subsidiary thereof nor with respect to the Subject Shares.
Nothing in this Section 4.4(f) (including any information provided to the
Purchaser by the Company pursuant to the Investigation) shall derogate from the
representations and warranties of the Company contained in Article III hereof or
the representations and warranties of the Seller contained in Article V, or from
the ability of Purchaser to rely on such representations and warranties or to
seek indemnification for Losses in respect of such representations and
warranties under Article IX.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller hereby represents and warrants to the Purchaser that as of the date
hereof:

 

5.1     Ownership of the Subject Shares. The Seller hereby represents and
warrants to the Purchaser that such Seller is the true and lawful registered
holders and beneficial owner of the Subject Shares, all of which shares are free
and clear of all Encumbrances. Upon consummation of the Acquisition, the
Purchaser will receive good and valid title to the Subject Shares, free and
clear of all Encumbrances. Other than the rights and obligations arising under
this Agreement, none of the Subject Shares is subject to any rights of any other
Person to acquire the same.

 

The Seller is not a party to any option, warrant, purchase right, or other
contract or commitment that could require it to sell, transfer, or otherwise
dispose of the Subject Shares (other than pursuant to this Agreement) nor is it
a party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any of the Subject Shares.

 

5.2     Authority Relative to This Agreement; No Violations or Conflicts.

 

(a)     Authority. This Agreement has been duly and validly executed and
delivered by the Seller and constitutes a valid and binding agreement of such
party, enforceable against such party in accordance with its terms, except that
enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).

 

(b)     No Violation. The Seller is not subject to, or obligated under, any
charter, bylaw or contractual provision or any license, franchise or permit, or
subject to any statute, regulation, rule, injunction, ruling, order or decree or
other restriction, that, by its terms, would be breached or violated or would
result in a default under (with or without notice or lapse of time or both), or
result in the imposition of a Encumbrance or would accelerate any payment or
obligation, trigger any right of first refusal or other purchase right as a
result of such Seller executing or carrying out the transactions contemplated by
this Agreement, except for any breaches or violations that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or the Purchaser or substantially impair or delay the consummation of the
Transactions contemplated hereby. No authorization, consent or approval of, or
filing with, any Governmental Authority, including the Commission, or third
party is necessary for the consummation by the Seller of the Transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals or filings the failure to obtain or make which would not, individually
or in the aggregate, have a Material Adverse Effect on the Purchaser or the
Company or substantially impair or delay the consummation of the Transactions
contemplated hereby.

 

(c)     No Conflict. The execution and delivery of this Agreement by the Seller
and the consummation of the transactions contemplated hereby do not and shall
not, with or without the giving of notice or the passage of time, (i) violate,
conflict with, or result in a breach of, or a default or loss of rights under,
any material covenant, agreement, mortgage, indenture, lease, instrument, permit
or license to which the Seller is a party or by which the Seller or any of the
Subject Shares are bound, or any judgment, order, decree, law, rule or
regulation to which such Seller or such shares are subject or (ii) result in the
creation of, or give any party any right to create, any Encumbrance or any other
right or adverse interest upon any of such shares.

 

 
-14-

--------------------------------------------------------------------------------

 

 

(d)      General Solicitation. Neither the Seller, nor any person acting on the
Seller's behalf, has conducted any form of general solicitation or general
advertising including, without limitation, any article, notice, advertisement or
other communication published in any newspaper, magazine or similar media or
broadcast over television, radio, the Internet or any other form of electronic
media, in connection with the sale of the Subject Shares.

 

(e)     Bad Actor. Neither the Seller, nor any person receiving remuneration or
a commission for participating in the offering and sale of the Subject Shares,
is (i) subject to a "bad actor" disqualification (under Rule 506(d)(1) or
certain other statutory disqualifications or (ii) subject to a statutory
disqualification described under section 3(a)(39) of the Securities Exchange Act
of 1934.

 

(f)      Consents; Permits; Defaults. Assuming the accuracy of the
representations and warranties of the Purchaser in Section 4, other than as
contemplated in this Agreement, none of the execution, delivery or performance
of this Agreement by the Company, the consummation by the Seller of the
Acquisition or any other transaction contemplated by this Agreement, or
compliance by the Company with any of the provisions of this Agreement will
require (with or without notice or lapse of time, or both) any consent,
approval, authorization or permit of, or filing or registration with or
notification to, any Governmental Authority or any other Person, other than the
failure to obtain such consents, approvals, authorizations or permits of, or to
make such filings, registrations with or notifications to any Governmental
Authority or any other Person, individually or in the aggregate, has not had a
Material Adverse Effect on the Company.

 

(g)      Compliance with Laws. In the last five (5) years the Seller has not
received any written communication from a Governmental Authority that alleges
that the Company is not in compliance with any federal, state, local or foreign
laws, ordinances and regulations or has not made all of the filings required by
all such authorities, organizations and agencies.

 

(h)      Disclosure of Material Information. The Seller has not provided the
Purchaser or its agents or counsel with any information that it believes
constitutes material non-public information (other than with respect to the
Transactions). The Seller understands and confirms that the Purchaser will be
relying on the foregoing representations in effecting transactions in securities
of the Company.

 

(i)     Broker. Except as specified in Schedule 5.2(i), the Seller has not
retained any broker in connection with any transaction contemplated by this
Agreement. The Seller shall not be obligated to pay any fee or commission
associated with the retention or engagement by the Seller of any broker in
connection with any transaction contemplated by this Agreement.

 

ARTICLE VI

PRE-CLOSING COVENANTS AND AGREEMENTS

 

6.1     Conduct of the Company. Except as contemplated by this Agreement, during
the period from the date hereof to the Closing Date, the Company agrees to
conduct its business in accordance with its ordinary and usual course of
business and in compliance with the Securities Act and the Exchange Act; use its
best efforts, subject to the foregoing, to preserve the Company’s business
organization, keep available to the Company the services of the Company’s
officers and employees and maintain satisfactory relationships with customers,
suppliers and others having business relationships with it; confer with
representatives of the Purchaser to keep them informed with respect to
operational matters of a material nature and to report the general status of the
ongoing operations of the business of the Company; maintain the Company’s books
and records in compliance with the Exchange Act; and refrain taking any of the
following actions without the express prior written consent of the Purchaser:

 

(i)     Incur any debt, Liability or obligation, direct or indirect, whether
accrued, absolute, contingent or otherwise, other than current liabilities
incurred in the ordinary and usual course of its business, or pay any debt,
Liability or obligation of any kind other than such current liabilities and
current maturities of existing long-term debt;

 

(ii)     Assume, guarantee, endorse or otherwise become responsible for the
obligations of any other individual, firm or corporation or make any loans or
advances to any individual, firm or corporation;

 

(iii)     Except as contemplated hereby, make any direct or indirect redemption,
purchase or other acquisition of any shares of its capital stock or declare, set
aside or pay any dividend or distribution (whether in cash, capital stock or
property) with respect to its capital stock;

 

 
-15-

--------------------------------------------------------------------------------

 

 

(iv)     Transfer, lease, mortgage, pledge or otherwise encumber any of its
Properties;

 

(v)     Sell, lease, transfer or dispose of any of its Properties (other than
sales of products to customers in the ordinary course), waive or release any
rights of material value, or cancel, compromise, release or assign any
indebtedness owed to it or any claims held by it;

 

(vi)     Make any investment of a capital nature either by purchase of stock or
securities, contributions to capital, property transfers or otherwise, or by the
purchase of any Property of any other individual, firm or corporation, other
than in the ordinary and usual course of its business;

 

(vii)     Enter into any transaction with any director, officer, stockholder or
Affiliate of the Company or with any Affiliate of any director, officer,
stockholder or Affiliate of the Company, except as contemplated by this
Agreement;

 

(viii)     Amend the Charter Documents;

 

 

(ix)     Increase in any manner the compensation or fringe benefits of any of
its directors, officers, employees, including any increase of pension or
retirement allowance, life insurance premiums or other benefit payments to any
such directors, officers or employees, or commit itself to any employment
agreement or employment arrangement with or for the benefit of any officer,
except as contemplated by this Agreement;

 

(x)     Violate any Legal Requirement applicable to the Company and/or its
business;

 

(xi)     Issue or sell any shares of the Company capital stock or other
securities (except for shares issuable upon exercise of outstanding stock
options), or grant or enter into any option, warrant, call or commitment with
respect to any securities of the Company;

 

(xii)     Merge or consolidate with, or purchase a substantial portion of the
assets of, or by any other manner acquire or combine with any business or any
corporation, partnership, limited liability company, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets which are material to the Company, its business, financial
condition or results of operations;

 

(xiii)     Pay any accrued fees or salaries to officers, directors,
stockholders, or Affiliates, except fees and salaries payable in accordance with
present practices of the Company;

 

(xiv)     Organize any subsidiaries, acquire any capital stock or other equity
securities of any corporation or acquire any equity or ownership interest in any
business;

 

(xv)     Prepay any obligation having a fixed maturity of more than ninety (90)
days from the date such obligation was issued or incurred;

 

(xvi)     Make any single non-inventory capital expenditure or commitment in
excess of Fifty Thousand Dollars ($50,000) or make aggregate non-inventory
capital expenditures and commitments in excess of Fifty Thousand Dollars
($50,000); or

 

(xvii)     Enter into an agreement to do any of the things described in clauses
(i) through (xvi) of this Section 6.1.

 

6.2     Regulatory Consents, Authorizations, etc. Each Party hereto will use its
reasonable best efforts to obtain all consents, authorizations, orders and
approvals of, and to make all filings and registrations with, any Governmental
Authority and any other Person which is required for or in connection with the
consummation by it of the Transactions and will cooperate fully with the other
Parties in assisting them to obtain such consents, authorizations, orders and
approvals and to make such filings and registrations. No Party hereto will take
or omit to take any action for the purpose of delaying, impairing or impeding
the receipt of any required consent, authorization, order or approval or the
making of any required filing or registration.

 

 
-16-

--------------------------------------------------------------------------------

 

 

6.3     Negotiations with Others. During the period from the date of this
Agreement to the Closing Date, or until this Agreement is terminated in
accordance with the provisions of Article X, if it is so terminated, the Seller
will not, directly or indirectly, initiate discussions or negotiations with, or
provide any information other than publicly available information to, any Person
(other than the Purchaser) concerning any possible proposal regarding a sale of
capital stock of the Company or a merger, consolidation, sale of substantially
all Properties or other similar transaction involving the Company or any
division or major asset of the Company without the express prior written consent
of the Purchaser, which consent may be withheld in the Purchaser’s sole and
absolute discretion.

 

6.4     Publicity. Neither the Seller nor the Company shall issue any press
release or otherwise make any public statement with respect to the Acquisition
without the express prior written consent of the Purchaser, except as may be
required under applicable Legal Requirements, provided, however, with respect to
the Company’s Current Report on Form 8-K to be filed with the Commission
disclosing, among other matters, the Company’s entry into this Agreement (the
“Form 8-K”), the Parties will consult with each other before filing such Form
8-K and provide each other the opportunity to review and comment upon such Form
8-K within the required time frame under applicable Legal Requirements, and the
Company shall not file such Form 8-K with the Commission without the Purchaser’s
express prior written consent, which shall not be unreasonably withheld,
conditioned or delayed

 

6.5     Access. From the date of this Agreement to the Closing Date, the Company
will provide access to the Purchaser and its representatives reasonable access
during normal business hours to the Properties, books, records, customer
accounts and Contracts of the Company and furnish to the Purchaser such
documents and information concerning the Company’s business as the Purchaser may
request. The Purchaser will hold, and will cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of applicable law, all confidential documents and
information concerning the Company and its business provided to them.

 

6.6     Appointment of Officers and Directors. The Company shall take all action
necessary to have effective immediately upon the Closing, (i) the initial
Purchaser Designee appointed as a member of the board of directors of the
Company, and (ii) subject to the Exchange Act and the rules of NYSE MKT LLC, the
other Purchaser Designees appointed to such other positions of the Company as
the Purchaser shall have communicated to the Company prior to the Closing,
including, but not limited to, maintaining the Continuing Director as the chief
executive officer of the Company.

 

6.7     Additional Agreements, Amendments or Supplements to Schedules.

 

(a)     Subject to the terms and conditions herein provided, each of the Parties
hereto agrees to use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all thing necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated by
this Agreement.

 

(b)     After the date hereof and prior to the Closing Date, the Company, as
soon as practicable, shall supplement or amend the Schedules required by this
Agreement with respect to any matter arising after the date hereof which, if
existing or occurring at the date hereof, would have been required to be set
forth or described in such Schedules.

 

ARTICLE VII

POST-CLOSING COVENANTS

 

7.1     Filing of Current Report on Form 8-K and Press Release. The Company
shall no later than four (4) Business Days after the Closing Date file the Form
8-K and a press release with the Commission. Other than with respect to such
Form 8-K and press release, the Parties will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to this Agreement and the
Acquisition and shall not issue any such press release or make any such public
statement without the prior written consent of the other Parties, except as may
be required pursuant to applicable Legal Requirements.

 

7.2     Filing of Schedule 14F-1. The Company shall as promptly as practicable
after the Closing Date file the Information Statement on Schedule 14F-1 with the
Commission consistent with its obligations set forth under Section 2.5 hereof.

 

7.3     Cancellation of Debts. The rescission agreement (the “Rescission
Agreement”), attached hereto as Exhibit A, by and between the Company and the
Seller and dated as of the Closing Date, the purpose of which is to eliminate
any debts and outstanding financial issues between the Seller and the Company,
shall become effective upon Closing.

 

 
-17-

--------------------------------------------------------------------------------

 

 

7.4     Continuation of Consulting Services. The current consulting services
provided by Mr. Ben-Zion Diamant to the Company and DPL for a monthly
consideration of $7,500 shall continue for a period of 18 months from the date
of this Agreement (the “Consulting Period”). If the Company terminates the
consulting services for any reason before the end of the Consulting Period, then
the Company shall pay Mr. Diamant the full remaining amount of the consulting
fees until the end of the Consulting Period, which shall be paid within 14 days
of such termination and bear interest at ten percent (10%) per annum until paid.

 

7.5     Capacity of the Continuing Director. As of the date hereof, the
Continuing Director is the Chief Executive officer of the Company. The Parties
hereto shall take any and all affirmative action necessary to maintain the
Continuing Director in such capacity.

 

7.6     Non-Competition, Non-Solicitation and Non-Disclosure.

 

(a)     General. In consideration of the payment of the Purchase Price, and in
order to induce the Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, the Seller does hereby covenant and agree as
follows:

 

(i)     Without the prior written consent of the Purchaser, the Seller shall not
for a period of five (5) years from and after the Closing Date (A) directly or
indirectly acquire or own in any manner any interest in any person, firm,
partnership, corporation, association or other entity (except that he may retain
his current ownership interest in the Company) which engages or plans to engage
in any facet of the business of the Company or any of its subsidiaries or
Affiliates, anywhere in the United States of America or Europe (the
“Territory”), (B) be employed by or serve as an employee, agent, officer,
director of, or as a consultant to, any person, firm, partnership, corporation,
association or other entity which engages or plans to engage in any facet of the
business of the Company or any of its subsidiaries or Affiliates within the
Territory, or (C) utilize his special knowledge of the business of the Company
and his or its relationships with customers, suppliers and others to compete
with the Company and/or any of its Affiliates in any business in which the
Company or any of its subsidiaries or Affiliates is engaged or plans to engage
in; provided, however, that nothing herein shall be deemed to prevent the Seller
from acquiring through market purchases and owning, solely as an investment,
less than three percent in the aggregate of the equity securities of any class
of any issuer whose shares are registered under §12(b) or 12(g) of the Exchange
Act, and are listed or admitted for trading on any United States national
securities exchange or are quoted on the OTCQB or OTCQX, or any similar system
of automated dissemination of quotations of securities prices in common use, so
long as Seller is not a member of any “control group” (within the meaning of the
rules and regulations of the Commission) of any such issuer. The Seller
acknowledges and agrees that the covenants provided for in this Section 7.6(a)
are reasonable and necessary in terms of time, area and line of business to
protect the Company’s Trade Secrets. The Seller further acknowledges and agrees
that such covenants are reasonable and necessary in terms of time, area and line
of business to protect the Company’s legitimate business interests, which
include its interests in protecting the Company’s (i) valuable confidential
business information, (ii) substantial relationships with customers throughout
the United States and Europe, and (iii) customer goodwill associated with the
ongoing business of the Company. Seller expressly authorizes the enforcement of
the covenants provided for in this Section 7.6(a) by (A) the Company and its
subsidiaries, (B) the Company’s permitted assigns, and (C) any successors to the
Company’s business. To the extent that the covenants provided for in this
Section 7.6(a) may later be deemed by a court to be too broad to be enforced
with respect to its duration or with respect to any particular activity or
geographic area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete specific
words or phrases to or from the provision. The provision as modified shall then
be enforced.

 

(ii)     Without the prior consent of Purchaser, for a period of five (5) years
from the Closing Date, the Seller shall not, directly or indirectly, for itself
or for any other person, firm, corporation, partnership, association or other
entity: (i) attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in excess of one
year, and/or (ii) call on or solicit any of the actual or targeted prospective
customers or clients of the Company, nor shall the Seller make known the names
and addresses of such customers or any information relating in any manner to the
Company’s trade or business relationships with such customers.

 

(iii)     The Seller shall not at any time divulge, communicate, use to the
detriment of the Company or for the benefit of any other person or persons, or
misuse in any way, any Confidential Information pertaining to the Company. Any
confidential information or data now known or hereafter acquired by the Seller
with respect to the Company shall be deemed a valuable, special and unique asset
of the Company that is received by the Seller in confidence and as a fiduciary,
and the Seller shall remain a fiduciary to the Company with respect to all of
such information.

 

 
-18-

--------------------------------------------------------------------------------

 

 

(b)     Injunction. It is recognized and hereby acknowledged by the Parties that
a breach or violation by the Seller of any or all of the covenants and
agreements contained in this Section 7.6 may cause irreparable harm and damage
to Purchaser in a monetary amount which may be virtually impossible to
ascertain. As a result, the Seller recognizes and hereby acknowledges that
Purchaser shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any breach or violation of any or all of
the covenants and agreements contained in this Section 7.6 by the Seller and/or
its associates, Affiliates, partners or agents, either directly or indirectly,
and that such right to injunction shall be cumulative and in addition to
whatever other rights or remedies the Purchaser may possess hereunder, at law or
in equity. Nothing contained in this Section 7.6 shall be construed to prevent
Purchaser or the Company from seeking and recovering from the Seller damages
sustained by either of them as a result of any breach or violation by the Seller
of any of the covenants or agreements contained herein.

 

7.7     Further Assurances. Subject to the terms and conditions herein provided,
each of the Parties hereto shall use reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable Legal Requirements to consummate
and make effective the transactions contemplated by this Agreement. Each of the
Parties hereto will use their respective reasonable best efforts to obtain the
consents of all Governmental Authorities and third parties necessary to the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the Parties will, as promptly as
practicable, apply for and diligently prosecute all applications for, and will
use their reasonable best efforts promptly to: (a) effect all necessary
registrations and filings, (b) defend any lawsuits or other legal proceedings,
whether judicial or administrative, whether brought derivatively or on behalf of
third parties (including Governmental Authorities or officials), challenging
this Agreement or the consummation of the Transactions and (c) furnish to each
other such information and assistance and to consult with respect to the terms
of any registration, filing, application or undertaking as reasonably may be
requested in connection with the foregoing. The provisions of this Section 7.7
shall survive the Closing.

 

7.8     Directors and Officers Insurance. The Company shall maintain, and renew
annually, its liability insurance policy for directors and officers or obtain a
new policy for directors and officers liability insurance (such current, renewed
or future policy, the “D&O Policy”) to ensure that the current and/or former
directors and officers of the Company continue to be consequently covered under
the D&O Policy for their liability, that will remain in effect for a period of
at least six years after the Closing, the material terms of which, including
scope of coverage, limits of liability, retroactive date, which are no less
favorable to those of the Company’s current directors and officers liability
insurance policy (a copy of which was delivered to the Purchaser).

 

The Company shall cooperate in good faith with the directors and officers
insured under the D&O Policy and the insurers of such policy with respect to
claims relating to wrongful acts occurring prior to the Closing. The Company
undertakes to indemnify the directors and officers insured under the D&O Policy
in accordance with the policy requirements and to pay the retention amount for
any insurance claim relating to wrongful acts occurring prior to the Closing.
The Company agrees that if the D&O Policy will be cancelled for any reason
including but not limited to a "Transaction" (as defined in the D&O Policy) or
other change of control or insolvency, or if the D&O Policy's terms and
conditions materially change, including, but not limited to, scope of coverage,
limit of liability, the retroactive date, the continuity dates, or if the
Company does not renew and\or purchase a policy for the subsequent year for any
reason whatsoever, then the Company shall immediately purchase a directors and
officers liability insurance policy which will include similar or improved terms
and conditions to the previous policy, including the scope of cover, limit of
liability, the retroactive date, the continuity dates, for a period which will
end no sooner than six years after the Closing (i.e., Tail Coverage). To the
extent possible, the D&O Policy shall contain necessary provisions to enable the
current and/or former directors and officers to acquire Tail Coverage if the
Company defaults on its obligations under this section. Notwithstanding Section
11.8 of this Agreement, the current directors and officers of the Company will
be deemed third party beneficiaries of this Section 7.8 and will be enforceable
by such persons, and their heirs and representatives.

 

If the Company (i) consolidates with or merges into any other Person and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
the surviving corporation shall assume the obligations set forth in this Section
7.8.

 

7.9     Directors and Officers Indemnification.      From and after the Closing
Date, Purchaser will cause the company to fulfill and honor, subject to any
limitations under applicable law, the obligations of the Company pursuant to the
indemnification agreements as in effect on the date hereof between the Company
and its directors and officers.

 

7.10     Directors Fees.     Prior to the Closing Date, the Company shall pay
all of its outstanding debts to its directors.

 

 
-19-

--------------------------------------------------------------------------------

 

 

ARTICLE VIII

CONDITIONS TO THE CLOSING

 

8.1     Conditions to Closing and the Seller’s Obligation to Sell the Subject
Shares. The obligations of the Seller to consummate the transactions
contemplated by this Agreement including, without limitation, the sale of the
Subject Shares to the Purchaser on the Closing Date, are subject to the
fulfillment, to the reasonable satisfaction of the Purchaser, prior to or on the
Closing Date of each of the following conditions:

 

(a)     Regulatory Consents, Authorizations, etc. All consents, authorizations,
orders and approvals of, and filings and registrations with, any Governmental
Authority which are required for or in connection with the execution and
delivery of this Agreement and the consummation by each Party hereto of the
Acquisition shall have been obtained or made

 

(b)     Representations, Warranties, Covenants, etc. The representations and
warranties of the Purchaser contained in this Agreement, taken together with the
Exhibits and Schedules attached hereto, shall have been true and correct in all
material respects on the date hereof and, taken together with the Schedules
attached hereto on the Closing Date, shall also be true and correct in all
material respects on and as of the Closing Date, except for changes contemplated
by this Agreement, with the same force and effect as if made on and as of the
Closing Date; and the Purchaser shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.

 

(c)     Litigation; Other Events. No claim, action, suit or proceeding shall
have been instituted or shall be threatened by any Person which seeks to
prohibit, restrict or delay consummation of the Acquisition, or any of the
conditions to consummation of such Acquisition, or to subject the Seller to
liability on the grounds that it has breached any law or regulation or otherwise
acted improperly in relation to the transactions contemplated by this Agreement.

 

(d)     Closing Deliveries. The Closing Deliveries specified in Section 2.3
shall have been made and delivered by the Purchaser.

 

8.2     Conditions to Closing and the Purchaser’s Obligation to Purchase the
Subject Shares. The obligations of the Purchaser to consummate the transactions
contemplated by this Agreement including, without limitation, the purchase of
the Subject Shares from the Seller on the Closing Date, are subject to
fulfillment, to the satisfaction of the Purchaser, on or prior to the Closing
Date, of each of the following conditions:

 

(a)     Regulatory Consents, Authorizations, etc. All consents, authorizations,
orders and approvals of, and filings and registrations with, any Governmental
Authority which are required for or in connection with the execution and
delivery of this Agreement and the consummation by each Party hereto of the
Acquisition shall have been obtained or made.

 

(b)     Representations, Warranties, Covenants, etc. The representations and
warranties of the Company and the Seller contained in this Agreement and/or the
other Transaction Documents, taken together with the Exhibits and Schedules
attached hereto, shall have been true and correct in all material respects on
the date hereof and, taken together with the Schedules attached hereto on the
Closing Date, shall also be true and correct in all material respects on and as
of the Closing Date, except for changes contemplated by this Agreement, with the
same force and effect as if made on and as of the Closing Date; and shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement and/or the other Transaction Documents to be
performed or complied with by each of them on or prior to the Closing Date.

 

(c)     Litigation; Other Events. No claim, action, suit or proceeding shall
have been instituted or shall be threatened by any Person which (i) seeks to
prohibit, restrict or delay consummation of the Acquisition, or any of the
conditions to consummation of such Acquisition (ii) seeks to subject the
Purchaser or any of its directors, officers, employees or agents to liability on
the grounds that it or they have breached any law or regulation or otherwise
acted improperly in relation to the transactions contemplated by this Agreement,
or otherwise (iii) could in sole and absolute discretion of the Purchaser have a
Material Adverse Effect on the Company or the Purchaser or their respective
businesses.

 

(d)     Due Diligence. The Purchaser shall have had the right through and until
the date of the Closing, to conduct a full due diligence review of the Company
and of its Affiliates, and shall be satisfied with the results thereof.

 

 
-20-

--------------------------------------------------------------------------------

 

 

(e)     No Material Adverse Effect. There shall not have been or occurred any
Material Adverse Effect with respect to the Company.

 

(f)     Proceedings Satisfactory. All proceedings to be taken by the Company and
the Seller in connection with the Transactions and all documents incident
thereto shall be satisfactory in form and substance to the Purchaser, and the
Purchaser shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.

 

(g)     Bankruptcy Proceedings. No proceeding in which the Company or the Seller
shall be a debtor, defendant or party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against such person
under any United States, state or foreign bankruptcy or insolvency law.

 

(h)     Listing of Common Stock. The shares of Common Stock shall be listed on
the NYSE MKT under the symbol “DPW” and there shall be at least three
broker-dealers registered with the Commission and a member of FINRA and SIPC
making a market in such shares.

 

(i)     Officer’s Certificate. The Company shall have delivered to the Purchaser
an Officer’s Certificate, dated as of the Closing Date, confirming the accuracy
of the Company’s representations, warranties and covenants as of the Closing
Date and confirming the compliance by the Company with the conditions precedent
set forth in this Section 8.2 as of the Closing Date.

 

(j)     Secretary’s Certificate. The Company shall have delivered to the
Purchaser a Secretary’s Certificate, dated as of the Closing Date, as to (i) the
resolutions adopted by the Company’s board of directors approving execution of
this Agreement, which resolutions shall be in full force and effect, (ii) the
Charter Documents, which Charter Documents shall be in full force and effect,
and (iii) the authority and incumbency of the officers of the Company executing
this Agreement and any other documents required to be executed or delivered in
connection therewith.

 

(k)     Seller’s Certificate. The Seller shall have delivered to the Purchaser a
Seller’s Certificate, dated as of the Closing Date, confirming the accuracy of
the Seller’s representations, warranties and covenants as of the Closing Date
and confirming the compliance by the Seller with the conditions precedent set
forth in this Section 8.2 as of the Closing Date.

 

(l)     DTC Eligibility. The shares of the Common Stock shall be DTC eligible
and proof thereof shall be furnished to the Purchaser.

 

(m)     Appointments. The Purchaser shall have appointed the initial Purchaser
Designee to its board of directors, and delivered proof thereof and shall have
delivered evidence of the appointment of the remaining Purchaser Designees to
serve on the board of directors (and such other positions as the Purchaser shall
have communicated prior to the Closing) following the Closing Date subject to
compliance by the Company with the requirements of Section 14(f) of the Exchange
Act.

 

(n)     Resignations. The Company shall prior to the Closing Date have (i)
obtained the resignation of each director of the Company other than the
Continuing Director and delivered copies thereof to the Purchaser (to be
effective as of the Closing) and (ii) maintained the Continuing Director as a
director of the Company.

 

(o)     Closing Deliveries. The Closing Deliveries specified in Section 2.2 and
Section 2.4 shall have been made and delivered by the Seller and the Company,
respectively.

 

(p)     No Liabilities. Other than as contemplated by this Agreement, the
Company shall not have any Liabilities (and there shall to the Company’s and the
Seller’s Knowledge be no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
it giving rise to any Liability).

 

(q)     Form 8-K. The Company shall be prepared and be ready to timely file the
Form 8-K within four (4) business days from the Closing Date.

 

(r)     Cancellation of Debts. The Rescission Agreement shall have been executed
and become effective upon Closing.

 

 
-21-

--------------------------------------------------------------------------------

 

 

(s)     Continuance of Consulting Services. The current consulting services
provided by Mr. Ben-Zion Diamant to the Company and DPL for a monthly
consideration of $7,500 shall continue for a period of 18 months from the date
of this Agreement (the “Consulting Period”). If the Company terminates the
consulting services for any reason before the end of the Consulting Period, then
the Company shall pay Mr. Diamant the full remaining amount of the consulting
fees until the end of the Consulting Period, which shall be paid within 14 days
of such termination and bear interest at ten percent (10%) per annum until paid.

 

 

ARTICLE IX

SURVIVAL AND INDEMNIFICATION

 

9.1     Survival of Representations and Warranties. The representations and
warranties of each of the Purchaser, Seller and the Company contained in this
Agreement or in any other certificate, writing or agreement delivered pursuant
hereto or in connection herewith shall survive the Closing Date for one (1)
year, except (i) as to any matter as to which a good faith claim has been
submitted in writing to the other Party describing the claim and Loss in
reasonable detail before such date and identified as a claim for indemnification
pursuant to this Article IX with respect to which the cause of action shall
expire when it is settled or otherwise determined in accordance with the
provisions of this article IX and (ii) as to any matter which is based
successfully upon fraud with respect to which the cause of action shall expire
only upon expiration of the applicable statute of limitations.

 

9.2     Obligations of Purchaser. Subject to the other terms and conditions of
this Article IX, the Purchaser shall indemnify, defend and hold harmless the
Seller and its shareholders, directors, officers, employees, Affiliates, agents,
representatives and permitted assigns, from and against any and all liabilities,
losses, damages, costs and expenses (including reasonable attorney’s fees and
costs) (collectively, “Losses”), directly or indirectly, as a result of, in
connection with, or based upon or arising from any of the following: (i) any
inaccuracy in or breach or non-performance of any of the representations,
warranties, covenants or agreements made by the Purchaser in this Agreement;
(ii) the failure of the Purchaser to perform fully any covenant, provision or
agreement to be performed or observed by it pursuant to this Agreement or (iii)
any other matter as to which the Purchaser in other provisions of this Agreement
have agreed to indemnify the Seller.

 

 

9.3     Obligations of the Seller. Subject to the other terms and conditions of
this Article IX, the Seller shall indemnify, defend and hold harmless the
Purchaser and its members, managers, directors, officers, employees, Affiliates,
agents, representatives and permitted assigns, from and against any and all
Losses, directly or indirectly, as a result of, in connection with, or based
upon or arising from any of the following: (i) any inaccuracy in or breach or
non-performance of any of the representations, warranties, covenants or
agreements made by the Seller or the Company in or pursuant to this Agreement;
(ii) the failure of the Seller or the Company to perform fully any covenant,
provision or agreement to be performed or observed by it pursuant to this
Agreement; (iii) any other matter as to which the Seller or the Company in other
provisions of this Agreement has agreed to indemnify the Purchaser; or (iv) any
claims of third parties (“Third Parties”) regarding the conduct of the business
of the Company and its Subsidiaries prior to the Closing Date which relate to
the breach of any warrant or representations of the Seller in this Agreement.
The Seller shall pay and reimburse the Indemnified Party (as hereinafter
defined) for any Loss suffered by the Indemnified Party in respect of any Loss
to which the foregoing indemnity relates. The amount of indemnifiable Losses is
net of any amounts actually recovered by an Indemnified Party from third parties
(including, without limitation, amounts actually recovered under insurance
policies) with respect to indemnifiable Losses.

 

9.4     Notice of Loss. The indemnified party herein (the “Indemnified Party”)
with respect to any Loss shall give prompt notice thereof to the indemnifying
party herein (the “Indemnifying Party”).

 

9.5     Defense. In the event any Third Party shall make a demand or claim or
file or threaten to file or continue any lawsuit, which demand, claim or lawsuit
may result in liability to an Indemnified Party in respect of matters covered by
the indemnity under this Agreement, or in the event that a potential Loss,
damage or expense comes to the attention of any Party in respect of matters
embraced by the indemnity under this Agreement, then the Party receiving notice
or becoming aware of such event shall promptly notify the other Party in writing
of the demand, claim or lawsuit. Within thirty (30) days after written notice by
the Indemnified Party (the “Notice”) to an Indemnifying Party of such demand,
claim or lawsuit, except as provided in the next sentence, the Indemnifying
Party shall have the option, at its sole cost and expense, to retain counsel to
defend any such demand, claim or lawsuit; provided that counsel who will conduct
the defense of such demand, claim or lawsuit will be approved by the Indemnified
Party whose approval will not unreasonably be withheld. The Indemnified Party
shall have the right, at its own expense, to participate in the defense of any
suit, action or proceeding brought against it with respect to which
indemnification may be sought hereunder; provided, if (i) the named parties to
any such proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them, and the Indemnifying Party has not retained separate
counsel for the Indemnified Party, (ii) the employment of counsel by such
Indemnified Party has been authorized in writing by the Indemnifying Party, or
(iii) the Indemnifying Party has not in fact employed counsel to assume the
defense of such action within a reasonable time; then, the Indemnified Party
shall have the right to retain its own counsel at the sole cost and expense of
the Indemnifying Party, which costs and expenses shall be paid by the
Indemnifying Party on a current basis. No Indemnifying Party, in the defense of
any such demand, claim or lawsuit, will consent to entry of any judgment or
enter into any settlement without the consent of the Indemnified Party. If any
Indemnified Party will have been advised by counsel chosen by it that there may
be one or more legal defenses available to such Indemnified Party which are
different from or in addition to those which have been asserted by the
Indemnifying Party and counsel retained by the Indemnifying Party declines to
assert those defenses, then, at the election of the Indemnified Party, the
Indemnifying Party will not have the right to continue the defense of such
demand, claim or lawsuit on behalf of such Indemnified Party and will reimburse
such Indemnified Party and any Person controlling such Indemnified Party on a
current basis for the reasonable fees and expenses of any counsel retained by
the Indemnified Party to undertake the defense. No Indemnified Party, in the
defense of any such demand, claim or lawsuit, will consent to entry of any
judgment or enter into any settlement without the consent of the Indemnifying
Party. In the event that the Indemnifying Party shall fail to respond within
thirty (30) days after receipt of the Notice, the Indemnified Party may retain
counsel and conduct the defense of such demand, claim or lawsuit, as it may in
its sole discretion deem proper, at the sole cost and expense of the
Indemnifying Party, which costs and expenses shall be paid by the Indemnifying
Party on a current basis. Failure to provide Notice shall not limit the rights
of such party to indemnification, except to the extent the Indemnifying Party’s
defense of the action is actually prejudiced by such failure. The assumption of
the defense, or the non-assumption of the defense, by the purported Indemnifying
Party will not affect such party’s right to dispute its obligation to provide
indemnification hereunder.

 

 
-22-

--------------------------------------------------------------------------------

 

 

9.6     Notice by the Parties. Each Party agrees to promptly notify the other of
any Liabilities, claims or misrepresentations, breaches or other matters covered
by this Article IX upon discovery or receipt of notice thereof.

 

9.7     Sole Remedy. The indemnification obligation under this Section 9 shall
be the sole and exclusive remedy available to any Indemnified Party with respect
to any Losses (and any breaches underlying such losses) incurred and/or
sustained by any Indemnified Party. No Indemnified Party and/or any
representative thereof shall have any other and/or additional liability and/or
indemnification obligation towards any Indemnified Party under any agreement
and/or Legal Requirements.

 

9.8     Maximum Payments; Remedy. No claim for indemnification may be made under
section 9 unless and until the aggregate amount of Losses of the Indemnified
Party that may be claimed thereunder exceeds $150,000 (the “Threshold”), and
once such Threshold has been reached, the Indemnifying Party shall be liable to
the Indemnified Party for the amount of Losses from the first Dollar.

 

In no event does the aggregate liability of the Indemnifying Party under section
9 exceed 50% of the Purchase Price (the "Cap"). The Cap shall not apply to any
Losses as a result of inaccuracies in the representations and warranties
contained in section 3.28 and any such Losses shall not exceed the Purchase
Price.

 

9.9     No Right to Set-Off. Unless explicitly stated otherwise in this
Agreement, no Party hereto shall have any right to set off any Losses against
any payments to be made by such Party pursuant to this Agreement or any other
agreement between the Parties hereto.

 

9.10     Limitation of Liability. In no event will either party be liable to any
Indemnified Party for any exemplary, punitive, special, indirect, consequential,
remote or speculative damages (other than, in each case, if such damages are
awarded to third parties in connection with a third-party claim), whether or not
such party has been advised of the possibility of such damages.

 

ARTICLE X

TERMINATION, AMENDMENT AND WAIVER

 

10.1     Termination. This Agreement may be terminated, and the Acquisition and
the other transactions contemplated hereby may be abandoned by action taken or
authorized by the board of directors or board of managers (as applicable) of the
terminating Party or Parties, whether before or after approval of the
Acquisition:

 

(a)     By mutual written consent of the Purchaser, on the one hand, and the
Seller, on the other hand, at any time prior to the Closing;

 

 
-23-

--------------------------------------------------------------------------------

 

 

(b)     By either the Purchaser, on the one hand, or the Seller, on the other
hand, if any court of competent jurisdiction or other Governmental Authority
shall have issued an Order or taken any other action restraining, enjoining or
otherwise prohibiting, prior to the Closing, the Acquisition; provided, however,
that the right to terminate this Agreement pursuant to this Section 10.1(b)
shall not be available to any Party if the issuance of such Order or other
action was due to the failure by such Party to perform any of its obligations
under this Agreement;

 

(c)     By the Purchaser, at any time prior to the Closing if: (i) there shall
be an Uncured Inaccuracy in any representation or warranty of the Company or the
Seller contained in this Agreement or breach of any covenant of the Company or
the Seller contained in this Agreement, (ii) the Purchaser shall have delivered
to the Company and the Seller written notice of such Uncured Inaccuracy or
breach and (iii) either such Uncured Inaccuracy or breach is not capable of cure
or at least 10 calendar days shall have elapsed since the date of delivery of
such written notice to the Company and such Uncured Inaccuracy or breach shall
not have been cured;

 

(d)     By the Company or the Seller, at any time prior to the Closing if: (i)
the Company or Seller, as applicable, is not in material breach of its
obligations under this Agreement; (ii) there shall be an Uncured Inaccuracy in
any representation or warranty of the Purchaser contained in this Agreement or
breach of any covenant of the Purchaser contained in this Agreement, (ii) the
Seller shall have delivered to the Purchaser written notice of such Uncured
Inaccuracy or breach and (iii) either such Uncured Inaccuracy or breach is not
capable of cure or at least 30 calendar days shall have elapsed since the date
of delivery of such written notice to the Purchaser and such Uncured Inaccuracy
or breach shall not have been cured; or

 

(e)     By either the Purchaser or Seller at any time prior to the Closing, if
the Company has suffered a Material Adverse Effect.

 

(f)     By Seller, Purchaser or the Company, if the Closing shall not have
occurred by September 30, 2016; provided, however, that the right to terminate
this Agreement under this Section 10.1(f) shall not be available to any party
who is in breach of this Agreement or whose action or failure to act has
materially contributed to or resulted in the failure of the acquisition to occur
on or before such date and such action or failure to act constitutes a breach of
this Agreement. The Purchaser has automatically a ten-day extension to cure any
default in funding as of September 30, 2016.

 

 

10.2     Effects and Liabilities upon Termination prior to the Closing Date. In
the event of the termination of this Agreement prior to the Closing Date as
provided in section 10.1, this Agreement shall thereafter be void and have no
effect as to the obligations of the Parties as to all matters to be performed on
or after the Closing Date, and no Party hereto shall have any liability
concerning those matters to be performed after the Closing Date to the other
Parties hereto or their respective stockholders, directors, officers, employees
or agents in respect thereof, except that nothing herein will relieve any Party
from liability for any fraud or intentional misrepresentation or intentional
breach of any covenant herein contained prior to such termination. If this
Agreement is terminated prior to the Closing Date, each of the Parties hereto
shall bear its own expenses incurred in negotiating the Transactions and the
preparation of this Agreement and its Schedules, Exhibits and all other related
documents.

 

10.3     Amendment. This Agreement may not be amended except by an instrument in
writing signed by each of the Parties hereto.

 

10.4     Waiver. At any time prior to the Closing, the Purchaser, on the one
hand, and the Seller, on the other hand, may (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii) waive any
Uncured Inaccuracies in the representations and warranties of the other
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance by the other Party with any of the agreements or covenants contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the Party or Parties to be bound thereby, but
such extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.

 

ARTICLE XI

MISCELLANEOUS

 

11.1     Assignment. Neither this Agreement nor any right created hereby shall
be assignable by any Party hereto.

 

 
-24-

--------------------------------------------------------------------------------

 

 

11.2     Non-Waiver. The failure in any one or more instances of a Party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said Party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving Party. A breach of any
representation, warranty or covenant shall not be affected by the fact that a
more general or more specific representation, warranty or covenant was not also
breached.

 

11.3     Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the Parties hereto, and their successors and permitted
assigns. Nothing in this Agreement, express or implied, shall confer on any
Person other than the Parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.

 

11.4     Notices. Any notice or communication must be in writing and will be
deemed given: (i) when delivered if delivered personally (including by courier);
(ii) on the seventh (7th) Business Day after mailing, if mailed, postage
prepaid, by registered or certified mail (return receipt requested); (iii) on
the third day after mailing if sent by a nationally recognized overnight
delivery service which maintains records of the time, place, and recipient of
delivery; or (iv) upon receipt of a confirmed transmission, if sent by email or
facsimile transmission. For purposes of notice, the addresses of the Parties
shall be:

 

If to the Purchaser:  

 

 

 

 

 

Philou Ventures, LLC

P.O. Box 3587

Tustin, CA 92705

Attention: Kristine L. Ault, Manager  

 

 

 

 

Telephone:

(949) 483-0422

 

Facsimile:

(714) 966-2649

 

Email:

kristy@mckea.com

 

If to the Company:

 

 

 

 

 

Digital Power Corporation

48430 Lakeview Blvd

Fremont, California 94538-3158

Attention: Amos Kohn, Chief Executive Officer  

        Telephone: (510) 657-2635   Facsimile: (510) (510) 657-6634   Email: 
akohn@digipwr.com

 

If to the Seller:          

Telkoor Telecom Ltd.

5 Giborei Israel

Netanya 42293 Israel

Attention: Ben-Zion Diamant, Chief Executive Officer

        Telephone: (972) 9 863 2310   Facsimile: (972) 9 865 8444   Email:
bdiamant@telkoortelecom.com

 

 
-25-

--------------------------------------------------------------------------------

 

 

11.5     Governing Law; Venue; Waiver of Trial by Jury. This Agreement shall be
governed solely and exclusively by and construed in accordance with the internal
laws of the State of California without regard to the conflicts of laws
principles thereof. The Parties hereto hereby expressly and irrevocably agree
that any suit or proceeding arising directly and/or indirectly pursuant to or
under this Agreement shall be brought solely in a federal or state court located
in the County of Alameda, California. By its execution hereof, the Parties
hereby covenant and irrevocably submit to the in personam jurisdiction of the
federal and state courts located in the State of California and agree that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon them
in the State of California. The Parties hereto expressly and irrevocably waive
any claim that any such jurisdiction is not a convenient forum for any such suit
or proceeding and any defense or lack of in person jurisdiction with respect
thereto. In the event of any such action or proceeding, the Party prevailing
therein shall be entitled to payment from the other Party hereto of its
reasonable counsel fees and disbursements.

 

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER
THIS AGREEMENT OR ANY AGREEMENT EXECUTED PURSUANT TO THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY AGREEMENT EXECUTED PURSUANT TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.5.

 

11.6     Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

11.7     Facsimile or Email Transmissions. This Agreement, the other Transaction
Documents and all agreements, documents and certificates delivered pursuant to
this Agreement and/or the other Transaction Documents or in connection with the
Transactions may be executed by any Party and transmitted by such Party to any
other Party or Parties by facsimile or email, and any such document shall be
deemed to have full force and effect as if the facsimile or email signature or
signatures on such documents were original.

 

11.8     Third Party Beneficiaries. None of the provisions of this Agreement or
any Transaction Document is intended to grant any right or benefit to any Person
or entity which is not a Party to this Agreement.

 

11.9     Headings. The article and section headings contained in this Agreement
are solely for the purpose of reference, are not part of this Agreement and
shall not in any way affect the meaning or interpretation of this Agreement.

 

11.10     Severability. In the event that any provision in this Agreement shall
be determined to be invalid, illegal or unenforceable in any respect, the
remaining provisions of this Agreement shall not be in any way impaired, and the
illegal, invalid or unenforceable provision shall be fully severed from this
Agreement and there shall be automatically added in lieu thereof a provision as
similar in terms and intent to such severed provision as may be legal, valid and
enforceable.

 

11.11     Entire Agreement. This Agreement and the other Transaction Documents,
constitute the entire contract between the Parties hereto pertaining to the
subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings between the Parties with respect to such subject matter.

 

11.12     Joint Negotiation and Drafting. The Parties hereto have participated
jointly in the negotiation and drafting of this Agreement and the agreements
ancillary hereto and, in the event that an ambiguity or question of intent or
interpretation arises, this Agreement and the agreements ancillary hereto shall
be construed as jointly drafted by the Parties hereto or thereto and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any provision of this Agreement or of any of the
agreements ancillary hereto.

 

11.13     Fees and Expenses. All fees and expenses incurred in connection with
this Agreement and the Transactions shall be paid by the Party incurring such
fees or expenses, whether or not the Transactions are consummated.

 

 

 

[signature page follows]

 

 
-26-

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.

 

 

PURCHASER:

 

        PHILOU VENTURES, LLC  

 

 

 

 

 

 

 

 

 

By:

/s/ Kristin L. Ault

 

 

Name:

Kristine L. Ault

 

 

Title:

Manager

 

 

 

 

COMPANY:

 

        DIGITAL POWER COMPANY  

 

 

 

 

 

 

 

 

 

By:

/s/ Amos Kohn

 

 

Name:

Amos Kohn

 

 

Title:

Chief Executive Officer

 

 

 

 

SELLER:

 

        TELKOOR TELECOM LTD  

 

 

 

 

 

 

 

 

 

By:

/s/ Ben-Zion Diamant

 

 

Name:

Ben-Zion Diamant

 

 

Title:

Chief Executive Officer

 

 

 

-27-