Acorn
Energy, Inc.





3844
Kennett Pike

Greenville, Delaware 19807


 


April
21, 2016


 


To
the Individual Shareholders of


DSIT
Solutions Ltd.


 


Dear
Sirs:


 


Reference
is made to that certain Share Purchase Agreement dated as of the date hereof (the “Share Purchase Agreement”)
by and among DSIT Solutions Ltd., an Israel limited liability company (“DSIT”), Rafael Advanced Defense Systems
Ltd., an Israel limited liability company (“Rafael”), the Shareholders Representative, Acorn Energy Inc., a
Delaware corporation (“Acorn”) and the individual shareholders of DSIT signatory thereto (the “Individual
Shareholders”), pursuant to which Rafael has agreed to purchase from Acorn, the Individual Shareholders, and certain other
shareholders of DSIT, and Acorn and the Individual Shareholders have agreed to sell to Rafael (together with certain other shareholders
of DSIT), a number of ordinary shares, par value ILS 0.01 per share, of DSIT (“Ordinary Shares”), equal in
the aggregate to 50% of the presently issued and outstanding Ordinary Shares on a fully diluted basis. As used herein, the term
“Ordinary Shares” shall include the Ordinary Shares as presently constituted, as well as any other securities into
which the same may hereafter be changed.


 


This
Letter Agreement sets forth the agreement between Acorn and the Individual Shareholders regarding the sale, transfer and other
disposition of the Ordinary Shares they will continue to own after consummation of the Share Purchase Agreement, and is a material
inducement to the parties hereto to enter into and consummate the Share Purchase Agreement and the Shareholders Agreement entered
into in connection therewith. Notwithstanding anything to the contrary in this Letter Agreement, this Letter Agreement is subordinate
to the terms of the Share Purchase Agreement and the other transaction documents, including without limitations, the Shareholders
Agreement, executed or adopted in connection with the Share Purchase Agreement, and in no event, the terms of this Letter shall
adversely affect in any manner the rights of Rafael or the obligations of any of the other parties under any of such agreements.


 




    	 	 	 



    	 	 	 



    


 


		1.	Drag-Along



 


If,
at any time, (i) Acorn desires to offer to sell to any person or persons, other than an affiliate of Acorn, all the Ordinary Shares
then held by Acorn and its affiliates for a sale price per Ordinary Share not less than 80% of the price per Ordinary Share under
the Share Purchase Agreement with Rafael (a “Divestiture”) and (ii) the Ordinary Shares then held by Acorn
and its affiliates represent at least 30% of the then issued and outstanding Ordinary Shares, then Acorn shall have the right
(“Drag Along Right”) to require each Individual Shareholder to participate in such sale of Ordinary Shares
by Acorn and to sell all of his Ordinary Shares, and the Individual Shareholders shall have the right (“Tag Along Right”)
to so participate, in each case on the same terms and conditions (including representations, warranties and indemnities, so long
as such representations, warranties, covenants and indemnities are not less favorable to the Individual Shareholders than those
in the Share Purchase Agreement with Rafael), as are applicable to Acorn’s sale of its Ordinary Shares in the Divestiture
To exercise its Drag Along Right, Acorn shall promptly deliver to each of the Individual Shareholders a written notice (the “Divestiture
Notice”) stating Acorn’s intention to sell all its Ordinary Shares and that it is electing thereby to exercise
its Drag Along Right pursuant to this Letter Agreement in connection therewith, and setting forth the terms and conditions of
the Divestiture, including, without limitation, to the extent known, the identity of the proposed purchaser and the amount and
type of consideration to be paid therefor. The Divestiture Notice shall be accompanied or followed, to the extent available, by
a copy of any written offer, letter of intent, term sheet or contract of sale pertaining to the Divestiture transaction. At any
time prior to the closing of a Divestiture in respect of which Acorn has exercised its Drag Along Right, Acorn may withdraw from
the Divestiture and its election to exercise its Drag Along Right upon written notice to the Individual Shareholders.


 


The
closing of the purchase and sale of any Ordinary Shares to be sold by the Individual Shareholders to the purchaser pursuant to
the Drag Along Right shall occur concurrently with the closing of the sale of the Ordinary Shares by Acorn to the purchaser in
the Divestiture. At any such closing, each Individual Shareholder shall deliver to the purchaser a certificate or certificates
representing the number of Ordinary Shares owned by such Individual Shareholder, duly endorsed in blank or accompanied by a duly
executed stock power in blank, with signatures duly guaranteed and all requisite stock transfer stamps affixed thereto.


 


The
individual Shareholders agree to cooperate with Acorn in effecting the Drag Along Right which is intended to allow Acorn to deliver
to the purchaser in the Divestiture the 50% of DSIT collectively held by Acorn and the Individual Shareholders.


 




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		2.	Co-Sale.



 


If,
at any time that it owns at least 20% of the issued and outstanding Ordinary Shares, Acorn proposes to sell to any person or persons,
other than an affiliate of Acorn, less than all of the Ordinary Shares then owned by Acorn, Acorn shall before proceeding with
such sale shall give to each Individual Shareholder written notice (the “Proposed Sale Notice”) stating Acorn’s
intention to sell such shares and setting forth the price and, to the extent then known, the other material terms and conditions
of the proposed sale. Each Individual Shareholder shall have the right (the “Right of Co-Sale”) to participate
on a pro-rata basis in the proposed sale (the “Proposed Sale”) on the same terms and conditions specified in
the Proposed Sale Notice. Each Individual Shareholder who desires to exercise its Right of Co-Sale, it must give Acorn written
notice to that effect within 15 days after delivery to such Individual Shareholder of the Proposed Sale Notice, and upon giving
such notice to Acorn, each such Individual Shareholder shall be deemed to have effectively exercised the Right of CoSale.


 


Each
Individual Shareholder who timely exercises its Right of Co-Sale may include in the Proposed Sale all or any part of its Ordinary
Shares equal to the product obtained by multiplying (i) the aggregate number of Ordinary Shares subject to the Proposed Sale by
(ii) a fraction, the numerator of which is the number of Ordinary Shares owned by such Individual Shareholder immediately before
consummation of the Proposed Sale and the denominator of which is the total number of Ordinary Shares owned, in the aggregate,
by all Individual Shareholders and Acorn, in the aggregate, immediately prior to the consummation of the Proposed Sale. To the
extent an Individual Shareholder exercises its Right of Co-Sale in accordance with the terms and conditions set forth herein,
the number of Ordinary Shares that Acorn may sell in the Proposed Sale shall be correspondingly reduced, if and to the extent
necessary to enable the Individual Shareholders to full participate in the Proposed Sale in accordance with the terms hereof.


 


Each
Individual Shareholder shall effect its participation in the Proposed Sale by delivering to Acorn, no later than five days after
the Individual Shareholder’s exercise of the Right of Co-Sale, one or more stock certificates, properly endorsed for transfer
to the purchaser in the Proposed Sale, representing the number of Ordinary Shares such Individual Shareholder elects to include
in the Proposed Sale. The terms and conditions of any such Proposed Sale will be memorialized in, and governed by, a written purchase
and sale agreement with the purchaser. Each stock certificate the Individual Shareholder delivers to Acorn pursuant to this Co-Sale
provision will be transferred to the purchaser in the Proposed Sale against payment therefor in consummation of the Proposed Sale
pursuant to the terms and conditions specified in the Proposed Sale Notice and the purchase and sale agreement, and Acorn shall
concurrently therewith remit to the applicable Individual Shareholder the portion of the sale proceeds to which such Individual
Shareholder is entitled by reason of its participation in such sale. Each Individual Shareholder exercising its Co-Sale Right
shall make such representations, warranties, covenants and indemnities as are required of Acorn in the Proposed Sale. If the purchaser
in the Proposed Sale refuses to purchase securities subject to the Right of Co-Sale directly from an Individual Shareholder exercising
its Right of Co-Sale hereunder, Acorn may not sell any Ordinary Shares to such purchaser unless and until, simultaneously with
such sale, Acorn purchases all securities subject to the Right of Co-Sale from such Individual Shareholder.


 




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If
any Proposed Sale is not consummated within 60 days after receipt of the Proposed Sale Notice, Acorn may at its option withdraw
from participation in the Proposed Sale not sell any of its Ordinary Shares unless it first once again complies in full with each
provision of this Section 2.


 


		3.	Successors
                                         and Assigns.



 


Each
of the Individual Shareholders and Acorn agrees not to directly or indirectly offer, sell, dispose of or otherwise transfer any
Ordinary Shares (or securities exercisable for or convertible into Ordinary Shares), or any interest therein, whether now owned
or hereafter acquired, other than in accordance with this Letter Agreement, unless the transferee (including for the removal of
doubt any affiliate of any party) shall agree in writing to be bound by this Letter Agreement, including, without limitation,
the Drag Along Right in favor of Acorn and the Tag Along Right and Right of Co-Sale in favor of the Individual Shareholders The
share certificates evidencing the Ordinary Shares held by Acorn and the Individual Shareholders shall bear an appropriate legend
with respect to this restriction. This Letter Agreement shall be binding on any legal successors of any party, including any affiliate
of Acorn which may become the owner of Acorn’s Ordinary Shares.


 


		4.	Failure
                                         to Comply. 



 


Each
party hereto acknowledges and agrees that any breach of this Letter Agreement would result in substantial harm to the other parties
hereto for which monetary damages alone could not adequately compensate. Therefore, the parties hereto unconditionally and irrevocably
agree that any non-breaching party hereto shall be entitled to seek protective orders, injunctive relief and other remedies available
at law or in equity, including, without limitation, seeking specific performance or the rescission of purchases, sales and other
transfers of Ordinary Shares not made in strict compliance with this Letter Agreement and to compel the parties hereto to comply
with any and all terms of this Agreement, including, without limitation to compel Individual Shareholders to deliver their Ordinary
Shares in connection with any exercise of the Drag Along Right by Acorn. The breaching party shall also reimburse the other party
for any and all fees and expenses, including legal fees and expenses, incurred by the other party as a result of any such breach.


 




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If
any Individual Shareholder party hereto becomes obligated to sell any Ordinary Shares under this Letter Agreement and fails to
deliver such Ordinary Shares in accordance with the terms of this Letter Agreement, Acorn may, at its option, in addition to all
other legal remedies it may have, send to such party the purchase price for such Ordinary Shares as is herein specified, and such
shall be deemed to represent the purchase of such Shares from the transferring Individual Shareholder;


 


This
Agreement and the rights and obligations of the parties herein shall expire on the third anniversary hereof. The Parties hereto
consent that Rafael Advanced Defense Systems Ltd. and the Company are designated third party beneficiaries of this expiration
date in the preceding sentence and the following paragraph.


 


Nothing
in this Agreement shall create any obligation on the Company or its other shareholders, and the Company and its other shareholders
shall not be liable in any way in connection with this Agreement and the provisions hereto.


 


Please
confirm your agreement to the foregoing by executing this letter below in the space indicated.


 


	 	Very
    truly yours,
	 	 
	Individual
    Shareholders:	 
	 	Benny
    Sela
	 	 
	 	 
	 	Michael
    Barth
	 	 
	 	 
	 	Ran
    Avgar
	 	 
	 	 
	 	Yitshak
    Peery 


 



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