GRIDSENSE
INC.


 


LOAN
AND SECURITY AGREEMENT


 




    	 



    	 



    


 


This
LOAN AND SECURITY AGREEMENT (the “Agreement”) is entered into as of November 2, 2012, by and between SQUARE 1 BANK
(“Bank”) and GRIDSENSE INC. (“Borrower”).


 


RECITALS


 


Borrower
wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth
the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.


 


AGREEMENT


 


The
parties agree as follows:


 


1.
DEFINITIONS AND CONSTRUCTION.


 


1.1
Definitions. As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A. Any term
used in the Code and not defined herein shall have the meaning given to the term in the Code.


 


1.2
Accounting Terms. Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and
all calculations shall be made in accordance with GAAP (except for non- compliance with FAS 123R in monthly reporting). The term
“financial statements” shall include the accompanying notes and schedules.


 


2.
LOAN AND TERMS OF PAYMENT.


 


2.1 Credit
Extensions.


 


(a)
Promise to Pay. Borrower promises to pay to Bank, in lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower, together with interest on the unpaid principal amount of such Credit
Extensions at rates in accordance with the terms hereof.


 


(b) Advances
Under Revolving Line.


 


(i)
Amount. Subject to and upon the terms and conditions of this Agreement (1) Borrower may request Advances in an aggregate outstanding
principal amount not to exceed the lesser of (A) the Revolving Line or (B) the Borrowing Base, less any amounts outstanding under
the Ancillary Services Sublimit, and (2) amounts borrowed pursuant to this Section 2.1(b) may be repaid and reborrowed at any
time prior to the Revolving Maturity Date, at which time all Advances under this Section 2.1(b) shall be immediately due and payable.
Borrower may prepay any Advances without penalty or premium.


 


(ii)
Form of Request. Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile transmission, telephone or email
no later than 3:30 p.m. Eastern time (2:30 p.m. Eastern time for wire transfers), on the Business Day that the Advance is to be
made. Each such notification shall be promptly confirmed by a Loan Advance/Paydown Request Form in substantially the form of Exhibit
C. Bank is authorized to make Advances under this Agreement, based upon instructions received from an Authorized Officer, or without
instructions if in Bank’s discretion such Advances are necessary to meet Obligations which have become due and remain unpaid.
Bank shall be entitled to rely on any telephonic or email notice given by a person whom Bank reasonably believes to be an Authorized
Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages, loss, costs and expenses suffered
by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section 2.1(b) to Borrower’s
deposit account.


 






    	 



    	 



    

 


(iii)
Ancillary Services Sublimit. Subject to the availability under the Revolving Line, at any time and from time to time
from the date hereof through the Business Day immediately prior to the Revolving Maturity Date, Borrower may request the
provision of Ancillary Services from Bank. The aggregate limit of the Ancillary Services shall not exceed the Ancillary
Services Sublimit, provided that availability under the Revolving Line shall be reduced by the aggregate limits of (i)
corporate credit card services provided to Borrower, (ii) the total amount of any Automated Clearing House processing
reserves, (iii) the applicable Foreign Exchange Reserve Percentage, and (iv) any other reserves taken by Bank in connection
with other treasury management services requested by Borrower and approved by Bank. In addition, Bank may, in its sole
discretion, charge as Advances any amounts for which Bank becomes liable to third parties in connection with the provision of
the Ancillary Services. The terms and conditions (including repayment and fees) of such Ancillary Services shall be subject
to the terms and conditions of the Bank’s standard forms of application and agreement for the applicable Ancillary
Services, which Borrower hereby agrees to execute.


 


(iv)
Collateralization of Obligations Extending Beyond Maturity. If Borrower has not secured to Bank’s satisfaction its obligations
with respect to any Ancillary Services by the Revolving Maturity Date, then, effective as of such date, the balance in any deposit
accounts held by Bank and the certificates of deposit or time deposit accounts issued by Bank in Borrower’s name (and any
interest paid thereon or proceeds thereof, including any amounts payable upon the maturity or liquidation of such certificates
or accounts), shall automatically secure such obligations to the extent of the then continuing or outstanding Ancillary Services.
Borrower authorizes Bank to hold such balances in pledge and to decline to honor any drafts thereon or any requests by Borrower
or any other Person to pay or otherwise transfer any part of such balances for so long as the applicable Ancillary Services are
outstanding or continue.


 


2.2
Overadvances. If the aggregate amount of the outstanding Advances exceeds the lesser of the Revolving Line or the Borrowing
Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess.


 


2.3 Interest
Rates, Payments, and Calculations.


 


(a)
Interest Rate. Except as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding daily balance thereof,
at a variable annual rate equal to the greater of (A) 3.25% above the Prime Rate then in effect, or (B) 6.50%.


 


(b)
Late Fee; Default Rate. If any payment is not made within 15 days after the date such payment is due, Borrower shall pay Bank
a late fee equal to the lesser of (i) 5% of the amount of such unpaid amount or (ii) the maximum amount permitted to be charged
under applicable law. All Obligations shall bear interest, from and after the occurrence and during the continuance of an Event
of Default, at a rate equal to 5 percentage points above the interest rate applicable immediately prior to the occurrence of the
Event of Default.


 


(c)
Payments. Interest under the Revolving Line shall be due and payable on the 1st calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts or against the Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder.


 


(d)
Computation. In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime
Rate. All interest chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.


 






    	 



    	 



    

 


2.4
Crediting Payments. Prior to the occurrence of an Event of Default, Bank shall credit a wire transfer of funds, check or
other item of payment to such deposit account or Obligation as Borrower specifies. After the occurrence and during the
continuance of an Event of Default, Bank shall have the right, in its sole discretion, to immediately apply any wire transfer
of funds, check, or other item of payment Bank may receive to conditionally reduce Obligations, but such applications of
funds shall not be considered a payment on account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 5:30 p.m. Eastern time shall be deemed to have been
received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and
be payable for the period of such extension.


 


2.5 Fees.
Borrower shall pay to Bank the following:


  


(a) Facility
Fee. On or before the Closing Date, a fee equal to $5,000, which shall be nonrefundable;


 


(b)
Bank Expenses. On the Closing Date, all Bank Expenses incurred through the Closing Date, and, after the Closing Date, all
Bank Expenses, as and when they become due; and


 


(c)
Success Fee. Upon Borrower’s consummation of an Acquisition where Borrower’s pre- money valuation is greater than
its current valuation (based on the per share price of preferred stock sold in Borrower’s most recent equity round prior
to the Closing Date), a fee equal to $25,000, which shall be nonrefundable. This Section 2.5(c) shall survive any termination
of this Agreement.


 


2.6
Term. This Agreement shall become effective on the Closing Date and, subject to Section 12.7, shall continue in full force
and effect for so long as any Obligations remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement.
Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement
immediately and without notice upon the occurrence and during the continuance of an Event of Default.


 


3. CONDITIONS
OF LOANS.


 


3.1
Conditions Precedent to Closing. The agreement of Bank to enter into this Agreement on the Closing Date is subject to the
condition precedent that Bank shall have received, in form and substance satisfactory to Bank, each the following items and completed
each of the following requirements:


 


(a) this
Agreement;


 


(b)
an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery
of this Agreement;


 


(c) a
financing statement (Form UCC-1);


 


(d)
payment of the fees and Bank Expenses then due specified in Section 2.5, which may be debited from any of Borrower’s
accounts with Bank;


 


(e)
current SOS Reports indicating that except for Permitted Liens, there are no other security interests or Liens of record in
the Collateral;


 


(f)
current financial statements, including company prepared financial statements for Borrower’s most recently ended fiscal
year, company prepared combined and combining balance sheets, income statements and statements of cash flows for the most recently
ended month in accordance with Section 6.2, and such other updated financial information as Bank may reasonably request;


 


(g) current
Compliance Certificate in accordance with Section 6.2;


 


(h) a
Borrower Information Certificate;


 


(i)
such other documents or certificates, and completion of such other matters, as Bank may reasonably request; and


  


(j)
Borrower shall have opened and funded not less than $50,000 in deposit accounts held with Bank.


 






    	 



    	 



    

 


3.2
Conditions Precedent to all Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial
Credit Extension, is contingent upon the Borrower’s compliance with Section 3.1 above, and is further subject to the following
conditions:


  


(a) timely
receipt by Bank of the Loan Advance/Paydown Request Form as provided in Section
2.1;


 


(b) an
audit of the Collateral, the results of which shall be satisfactory to Bank;


 


(c) Bank’s
review and approval of Borrower’s 2013 plan;


 


(d)
Bank’s receipt of evidence that Borrower has received at least $2,000,000 in net cash proceeds from Acorn Energy, Inc.
on terms and conditions reasonably acceptable to Bank;


 


(e)
Borrower shall have transferred substantially all of its Cash assets into operating accounts held with Bank and otherwise
be in compliance with Section 6.6 hereof; and


 


(f)
the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as of
the date of such Loan Advance/Paydown Request Form and on the effective date of each Credit Extension as though made at and as
of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties expressly referring to another date shall be true, correct
and complete in all material respects as of such date). The making of each Credit Extension shall be deemed to be a representation
and warranty by Borrower on the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2.


 


4.
CREATION OF SECURITY INTEREST.


 


4.1
Grant of Security Interest. Borrower grants and pledges to Bank a continuing security interest in the Collateral to secure
prompt repayment of any and all Obligations and to secure prompt performance by Borrower of each of its covenants and duties under
the Loan Documents. Except for Permitted Liens or as disclosed in the Schedule, such security interest constitutes a valid, first
priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest
in later-acquired Collateral. Borrower also hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a security
interest in, or encumber any of its Intellectual Property. Notwithstanding any termination of this Agreement or of any filings
undertaken related to Bank’s rights under the Code, Bank’s Lien on the Collateral shall remain in effect for so long
as any Obligations are outstanding.


 


4.2
Perfection of Security Interest. Borrower authorizes Bank to file at any time financing statements, continuation statements,
and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of Borrower
of the kind pledged hereunder, and (ii) contain any other information required by the Code for the sufficiency of filing office
acceptance of any financing statement, continuation statement, or amendment, including whether Borrower is an organization, the
type of organization and any organizational identification number issued to Borrower, if applicable. Borrower shall have possession
of the Collateral, except where expressly otherwise provided in this Agreement or where Bank chooses to perfect its security interest
by possession in addition to the filing of a financing statement. Where Collateral is in possession of a third party bailee, Borrower
shall take such steps as Bank reasonably requests for Bank to (i) subject to Section 7.10 below, obtain an acknowledgment, in
form and substance satisfactory to Bank, of the bailee that the bailee holds such Collateral for the benefit of Bank, and (ii)
obtain “control” of any Collateral consisting of investment property, deposit accounts, letter-of-credit rights or
electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code) by causing
the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance satisfactory
to Bank. Borrower will not create any chattel paper without placing a legend on the chattel paper acceptable to Bank indicating
that Bank has a security interest in the chattel paper. Borrower from time to time may deposit with Bank specific cash collateral
to secure specific Obligations; Borrower authorizes Bank to hold such specific balances in pledge and to decline to honor any
drafts thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long
as the specific Obligations are outstanding. Borrower shall take such other actions as Bank requests to perfect its security interests
granted under this Agreement.


 






    	 



    	 



    

 


5.
REPRESENTATIONS AND WARRANTIES.


 


Borrower
represents and warrants as follows:


 


5.1
Due Organization and Qualification. Borrower and each Subsidiary is a corporation duly existing under the laws of the state
in which it is organized and qualified and licensed to do business in any state in which the conduct of its business or its ownership
of property requires that it be so qualified, except where the failure to do so would not reasonably be expected to cause a Material
Adverse Effect.


 


5.2
Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within Borrower’s
powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s
Articles of Incorporation or Bylaws, nor will they constitute an event of default under any material agreement by which Borrower
is bound. Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably
be expected to cause a Material Adverse Effect.


 


5.3
Collateral. Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear
of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens. Other than movable items of personal
property such as laptop computers, all Collateral having an aggregate book value not in excess of $100,000 is located solely in
the Collateral States. The Eligible Accounts are bona fide existing obligations. The property or services giving rise to such
Eligible Accounts has been delivered or rendered to the account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. Borrower has not received notice of actual or imminent Insolvency Proceeding of any account
debtor whose accounts are included in any Borrowing Base Certificate as an Eligible Account. All Inventory is in all material
respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have
been made. Except as set forth in the Schedule, none of the Borrower’s Cash is maintained or invested with a Person other
than Bank or Bank’s affiliates.


 


5.4
Intellectual Property. Borrower’s Intellectual Property is set forth on Schedule 5.4 hereto. Borrower is the sole owner
of the Intellectual Property, except for licenses granted by Borrower to its customers in the ordinary course of business. To
the best of Borrower’s knowledge, each of the Copyrights, Trademarks and Patents is valid and enforceable, and no part of
the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made to Borrower
that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably
be expected to cause a Material Adverse Effect.


 


5.5
Name; Location of Chief Executive Office. Except as disclosed in the Schedule, Borrower has not done business under any name
other than that specified on the signature page hereof, and its exact legal name is as set forth in the first paragraph of this
Agreement. The chief executive office of Borrower is located at the address indicated in Section 10 hereof.


 


5.6
Litigation. Except as set forth in the Schedule, there are no actions or proceedings pending by or against Borrower or any
Subsidiary before any court or administrative agency in which a likely adverse decision would reasonably be expected to have a
Material Adverse Effect.


 


5.7
No Material Adverse Change in Financial Statements. All combined and combining financial statements related to Borrower
and any Subsidiary that are delivered by Borrower to Bank fairly present in all material respects Borrower’s combined
and combining financial condition as of the date thereof and Borrower’s combined and combining results of operations
for the period then ended. There has not been a material adverse change in the combined or in the combining financial
condition of Borrower since the date of the most recent of such financial statements submitted to Bank.


 






    	 



    	 



    

 


5.8
Solvency, Payment of Debts. Borrower is able to pay its debts (including trade debts) as they mature; the fair saleable value
of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower
is not left with unreasonably small capital after the transactions contemplated by this Agreement.


 


5.9
Compliance with Laws and Regulations. Borrower and each Subsidiary have met the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. No event has occurred resulting from Borrower’s failure to comply
with ERISA that is reasonably likely to result in Borrower’s incurring any liability that could have a Material Adverse
Effect. Borrower is not an “investment company” or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations
T and U of the Board of Governors of the Federal Reserve System). Borrower has not violated any statutes, laws, ordinances or
rules applicable to it, the violation of which would reasonably be expected to have a Material Adverse Effect. Borrower and each
Subsidiary have filed or caused to be filed all tax returns required to be filed, and have paid, or have made adequate provision
for the payment of, all taxes reflected therein except those being contested in good faith with adequate reserves under GAAP or
where the failure to file such returns or pay such taxes would not reasonably be expected to have a Material Adverse Effect.


 


5.10
Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted
Investments.


 


5.11
Government Consents. Borrower and each Subsidiary have obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower’s
business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse
Effect.


 


5.12
Inbound Licenses. Except as disclosed on the Schedule, Borrower is not a party to, nor is bound by, any material license or
other agreement important for the conduct of Borrower’s business that prohibits or otherwise restricts Borrower from granting
a security interest in Borrower’s interest in such license or agreement or any other property important for the conduct
of Borrower’s business, other than this Agreement or the other Loan Documents.


 


5.13
Full Disclosure. No representation, warranty or other statement made by Borrower in any certificate or written statement furnished
to Bank taken together with all such certificates and written statements furnished to Bank contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements
not misleading in light of the circumstances in which they were made, it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results
during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.


 


6. AFFIRMATIVE
COVENANTS.


 


Borrower
covenants that, until payment in full of all outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:


 


6.1
Good Standing and Government Compliance. Borrower shall maintain its and each of its Subsidiaries’ corporate
existence and good standing in the respective states of formation, shall maintain qualification and good standing in each
other jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect, and
shall furnish to Bank the organizational identification number issued to Borrower by the authorities of the state in which
Borrower is organized, if applicable. Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to ERISA. Borrower shall comply, and shall cause
each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject,
and shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements,
the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.


 






    	 



    	 



    

 


6.2
Financial Statements, Reports, Certificates. Borrower shall deliver to Bank: (i) as soon as available, but in any event
within 30 days after the end of each calendar month, a company prepared combined balance sheet, income statement and
statement of cash flows covering Borrower’s operations during such period, in a form reasonably acceptable to Bank and
certified by a Responsible Officer; (ii) as soon as available, but in any event within 180 days after the end of
Borrower’s fiscal year, combined financial statements of Borrower prepared in accordance with GAAP reviewed by an
independent certified public accounting firm reasonably acceptable to Bank; (iii) annual budget and operating plan approved
by Borrower’s Board of Directors as soon as available but not later than December 15 of each calendar year during the
term hereof; (iv) if applicable, copies of all statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the
Securities and Exchange Commission; (v) promptly upon receipt of notice thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that could reasonably be expected to result in damages or costs to Borrower or
any Subsidiary of $250,000 or more; (vi) promptly upon receipt, each management letter prepared by Borrower’s
independent certified public accounting firm regarding Borrower’s management control systems; and (vii) such budgets,
sales projections, operating plans or other financial information generally prepared by Borrower in the ordinary course of
business as Bank may reasonably request from time to time.


 


(a)
Within 30 days after the last day of each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit D hereto, together with aged listings by invoice date of accounts receivable and
accounts payable.


 


(b)
Within 30 days after the last day of each month, Borrower shall deliver to Bank with the monthly financial statements a Compliance
Certificate certified as of the last day of the applicable month and signed by a Responsible Officer in substantially the form
of Exhibit E hereto.


 


(c)
As soon as possible and in any event within 3 calendar days after becoming aware of the occurrence or existence of an Event
of Default hereunder, a written statement of a Responsible Officer setting forth details of the Event of Default, and the action
which Borrower has taken or proposes to take with respect thereto.


 


(d)
Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to
time during Borrower’s usual business hours but no more than twice a year (unless an Event of Default has occurred and is
continuing), to inspect Borrower’s Books and to make copies thereof and to check, test, inspect, audit and appraise the
Collateral at Borrower’s expense in order to verify Borrower’s financial condition or the amount, condition of, or
any other matter relating to, the Collateral.


 


Borrower
may deliver to Bank on an electronic basis any certificates, reports or information required pursuant to this Section 6.2, and
Bank shall be entitled to rely on the information contained in the electronic files, provided that Bank in good faith believes
that the files were delivered by a Responsible Officer. Borrower shall include a submission date on any certificates and reports
to be delivered electronically.


 


6.3
Inventory and Equipment; Returns. Borrower shall keep all Inventory and Equipment in good and merchantable condition, free
from all material defects except for Inventory and Equipment (i) sold in the ordinary course of business, and (ii) for which adequate
reserves have been made, in all cases in the United States and such other locations as to which Borrower gives prior written notice.
Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist on the Closing Date. Borrower shall promptly notify Bank of all returns
and recoveries and of all disputes and claims involving inventory having a book value of more than $100,000.


 






    	 



    	 



    

 


6.4
Taxes. Borrower shall make, and cause each Subsidiary to make, due and timely payment or deposit of all material
federal, state, and local taxes, assessments, or contributions required of it by law, including, but not limited to, those
laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will execute and deliver to Bank, on demand, proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits and any appropriate
certificates attesting to the payment or deposit thereof; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the
extent required by GAAP) by Borrower or such Subsidiary.


 


6.5
Insurance. Borrower, at its expense, shall (i) keep the Collateral insured against loss or damage, and (ii) maintain liability
and other insurance, in each case in as ordinarily insured against by other owners in businesses similar to Borrower’s.
All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank.
All policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Bank, showing
Bank as an additional loss payee, and all liability insurance policies shall show Bank as an additional insured and specify that
the insurer must give at least 20 days notice to Bank before canceling its policy for any reason. Within 30 days of the Closing
Date, Borrower shall cause to be furnished to Bank a copy of its policies or certificate of insurance including any endorsements
covering Bank or showing Bank as an additional insured. Upon Bank’s request, Borrower shall deliver to Bank certified copies
of the policies of insurance and evidence of all premium payments. Proceeds payable under any casualty policy will, at Borrower’s
option, be payable to Borrower to replace the property subject to the claim, provided that any such replacement property shall
be deemed Collateral in which Bank has been granted a first priority security interest, provided that if an Event of Default has
occurred and is continuing, all proceeds payable under any such policy shall, at Bank’s option, be payable to Bank to be
applied on account of the Obligations.


 


6.6
Primary Depository. Subject to the provisions of Section 3.1(k) and 3.2(d), Borrower within 30 days of the Closing Date shall
maintain all its depository and operating accounts with Bank and its primary investment accounts with Bank or Bank’s affiliates.
Notwithstanding the foregoing, Borrower shall be permitted to maintain deposit accounts outside Bank with aggregate balances not
to exceed $50,000 at any time.


 


6.7
Minimum EBITDA Borrower shall achieve EBITDA determined in accordance with GAAP and measured as of the last day of each month
on a trailing 3-month basis, of not less than the amounts set forth below for the corresponding reporting periods. Covenant levels
for subsequent reporting periods shall be determined by Bank based upon Borrower’s Board-approved operating plan, which
shall be provided to Bank in accordance with Section 6.2 of the Agreement, and incorporated into an amendment to this Agreement
which Borrower hereby agrees to execute.


 


	For the 3 months ending:	 	 	Minimum EBITDA	 
	June 30, 2012	 	 	$	(1,000,000	)
	July 31, 2012	 	 	$	(1,000,000	)
	August 31, 2012	 	 	$	(1,100,000	)
	September 30, 2012	 	 	$	(1,400,000	)
	October 31, 2012	 	 	$	(1,750,000	)
	November 30, 2012	 	 	$	(1,300,000	)
	December 31, 2012	 	 	$	(1,100,000	)



 


 


6.8 Intentionally
Omitted.


 


6.9
Consent of Inbound Licensors. Prior to entering into or becoming bound by any material inbound license or agreement,
Borrower shall: (i) provide written notice to Bank of the material terms of such license or agreement with a description of
its likely impact on Borrower’s business or financial condition; and (ii) in good faith use commercially reasonable
efforts to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for Borrower’s interest
in such licenses or contract rights to be deemed Collateral and for Bank to have a security interest in it that might
otherwise be restricted by the terms of the applicable license or agreement, whether now existing or entered into in the
future, provided, however, that the failure to obtain any such consent or waiver shall not constitute a default under this
Agreement.


 






    	 



    	 



    

 


6.10
Further Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take
such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.


 


7.
NEGATIVE COVENANTS.


 


Borrower
covenants and agrees that, so long as any credit hereunder shall be available and until the outstanding Obligations are paid in
full or for so long as Bank may have any commitment to make any Credit Extensions, Borrower will not do any of the following without
Bank’s prior written consent, which shall not be unreasonably withheld:


 


7.1
Dispositions. Convey, sell, lease, license, transfer or otherwise dispose of (collectively, to “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of its business or property, or move cash balances on deposit with
Bank to accounts opened at another financial institution, other than Permitted Transfers.


 


7.2
Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control.
Change its name or the state of Borrower’s formation or relocate its chief executive office without 30 days prior written
notification to Bank; replace or suffer the departure of its chief executive officer or chief financial officer without delivering
written notification to Bank within 10 days; fail to appoint an interim replacement or fill a vacancy in the position of chief
executive officer or chief financial officer for more than 30 consecutive days; suffer a change on its board of directors, which
results in the failure of at least one partner of Acorn Energy, Inc. or its Affiliates) to serve as a voting member, or suffer
the resignation of one or more directors from its board of directors in anticipation of Borrower’s insolvency, in either
case without the prior written consent of Bank which may be withheld in Bank’s sole discretion; take action to liquidate,
wind up, or otherwise cease to conduct business in the ordinary course; engage in any business, or permit any of its Subsidiaries
to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrower;
change its fiscal year end; have a Change in Control.


 


7.3
Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any
other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower), or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person
except where (a) each of the following conditions is applicable: (i) the consideration paid in connection with such transactions
(including assumption of liabilities) does not in the aggregate exceed $250,000 during any fiscal year, (ii) no Event of Default
has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in
a Change in Control, and (iv) Borrower is the surviving entity; or (b) the Obligations are repaid in full concurrently with the
closing of any merger or consolidation of Borrower in which Borrower is not the surviving entity; provided, however, that Borrower
shall not, without Bank’s prior written consent, such consent not to be unreasonably withheld, enter into any binding contractual
arrangement with any Person to attempt to facilitate a merger or acquisition of Borrower, unless (i) no Event of Default exists
when such agreement is entered into by Borrower, (ii) such agreement does not give such Person the right to claim any fee, payment
or damages from any parties, other than from Borrower or Borrower’s investors, in connection with a sale of Borrower’s
stock or assets pursuant to or resulting from an assignment for the benefit of creditors, an asset turnover to Borrower’s
creditors (including, without limitation, Bank), foreclosure, bankruptcy or similar liquidation, and (iii) Borrower notifies Bank
in advance of entering into such an agreement (provided, the failure to give such notification shall not be deemed a material
breach of this Agreement).


 


7.4
Indebtedness. Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary
so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation
to prepay any Indebtedness, except Indebtedness to Bank.


 




    	 



    	 



    


 


7.5
Encumbrances. Create, incur, assume or allow any Lien with respect to its property, or assign or otherwise convey any right
to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens,
or covenant to any other Person (other than (i) the licensors of in-licensed property with respect to such property or (ii) the
lessors of specific equipment or lenders financing specific equipment with respect to such leased or financed equipment) that
Borrower in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of Borrower’s
property.


 


7.6
Distributions. Pay any dividends to its stockholders or make any other distribution or payment on account of or in redemption,
retirement or purchase of any capital stock, except that Borrower may (i) repurchase the stock of former employees pursuant to
stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving
effect to such repurchase, and (ii) repurchase the stock of former employees pursuant to stock repurchase agreements by the cancellation
of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists. Make any distributions
or otherwise transfer any assets to Gridsense Pty Limited (Australia) other than Permitted Australian Distributions.


 


7.7
Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries
so to do, other than Permitted Investments, or maintain or invest any of its Investment Property with a Person other than Bank
or Bank’s Affiliates or permit any Subsidiary to do so unless such Person has entered into a control agreement with Bank,
in form and substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement
that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower.


 


7.8
Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate
of Borrower except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.


 


7.9
Subordinated Debt. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such
payment, except in compliance with the terms of such Subordinated Debt, or amend any provision affecting Bank’s rights contained
in any documentation relating to the Subordinated Debt without Bank’s prior written consent.


 


7.10
Inventory and Equipment. Store the Inventory or the Equipment of a book value in excess of $250,000
with a bailee, warehouseman, collocation facility or similar third party unless the third party has been notified of Bank’s
security interest and Bank (a) has received an acknowledgment from the third party that it is holding or will hold the Inventory
or Equipment for Bank’s benefit or (b) is in possession of the warehouse receipt, where negotiable, covering such Inventory
or Equipment. Except for Inventory sold in the ordinary course of business and for movable items of personal property having an
aggregate book value not in excess of $250,000, and except for such other locations as Bank may approve in writing, Borrower shall
keep the Inventory and Equipment only at the location set forth in Section 10 and such other locations of which Borrower gives
Bank prior written notice and as to which Bank is able to take such actions as may be necessary to perfect its security interest
or to obtain a bailee’s acknowledgment of Bank’s rights in the Collateral.


 


7.11
No Investment Company; Margin Regulation. Become or be controlled by an “investment company,” within the meaning
of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the
business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension
for such purpose.


 


8.
EVENTS OF DEFAULT.


 


Any
one or more of the following events shall constitute an Event of Default by Borrower under this Agreement:


 


8.1 Payment
Default. If Borrower fails to pay any of the Obligations when due;


 




    	 



    	 



    


 


8.2 Covenant
Default.


 


(a)
If Borrower fails to perform any obligation under Sections 6.2 (financial reporting), 6.4 (taxes), 6.5 (insurance), 6.6 (primary
accounts) or 6.7 (financial covenants), or violates any of the covenants contained in Article 7 of this Agreement; or


 


(b)
If Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant contained in this
Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition or covenant that can be cured, has failed to cure such default within 10 days after
Borrower receives notice thereof or any officer of Borrower becomes aware thereof; provided, however, that if the default cannot
by its nature be cured within the 10 day period or cannot after diligent attempts by Borrower be cured within such 10 day period,
and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable time period the failure to have
cured such default shall not be deemed an Event of Default but no Credit Extensions will be made;


 


8.3
Material Adverse Change. If there occurs any circumstance or any circumstances which would reasonably be expected to have
a Material Adverse Effect;


 


8.4
Attachment. If any material portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment,
seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within 10 days, or if Borrower is enjoined,
restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs,
or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower’s assets, or if a notice
of lien, levy, or assessment is filed of record with respect to any material portion of Borrower’s assets by the United
States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten days after Borrower receives notice thereof, provided that none of the foregoing shall
constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest
by Borrower (provided that no Credit Extensions will be made during such cure period);


 


8.5
Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within 30 days (provided that no Credit Extensions will be made prior
to the dismissal of such Insolvency Proceeding);


 


8.6
Other Agreements. If there is a default or other failure to perform in any agreement to which Borrower is a party with a third
party or parties (a) resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity
of any Indebtedness in an amount in excess of $250,000, (b) in connection with any lease of real property, or (c) that would reasonably
be expected to have a Material Adverse Effect;


 


8.7
Judgments. If a final, uninsured judgment or judgments for the payment of money in an amount, individually or in the aggregate,
of at least $250,000 shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of 10 days (provided
that no Credit Extensions will be made prior to the satisfaction or stay of the judgment); or


 


8.8
Misrepresentations. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or
representation set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement
or to induce Bank to enter into this Agreement or any other Loan Document.


 




    	 



    	 



    


 


9. BANK’S
RIGHTS AND REMEDIES.


 


9.1
Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without
notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:


 


(a)
Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5 (insolvency), all Obligations
shall become immediately due and payable without any action by Bank);


 


(b)
Demand that Borrower (i) deposit cash with Bank in an amount equal to the amount of any Letters of Credit remaining undrawn,
as collateral security for the repayment of any future drawings under such Letters of Credit, and (ii) pay in advance all Letter
of Credit fees scheduled to be paid or payable over the remaining term of the Letters of Credit, and Borrower shall promptly deposit
and pay such amounts;


 


(c) Cease
advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;


 


(d)
Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;


 


(e)
Make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate.
Borrower authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral,
or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination
appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect
to any of Borrower’s owned premises, Borrower hereby grants Bank a license to enter into possession of such premises and
to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity,
or otherwise;


 


(f)
Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, and (ii) indebtedness
at any time owing to or for the credit or the account of Borrower held by Bank;


 


(g)
Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section
9.1, to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under
this Section 9.1, Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit;


 


(h)
Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower’s premises) as Bank determines is commercially reasonable,
and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate. Bank may sell the Collateral without
giving any warranties as to the Collateral. Bank may specifically disclaim any warranties of title or the like. This procedure
will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Bank sells any of the
Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Bank, and applied
to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Borrower
shall be credited with the proceeds of the sale;


 


(i) Bank
may credit bid and purchase at any public sale;


 




    	 



    	 



    


 


(j)
Apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without notice and without
regard to the adequacy of the security for the Obligations and without regard to the solvency of Borrower, any guarantor or any
other Person liable for any of the Obligations; and


 


(k)
Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.


 


Bank
may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance
will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.


 


9.2
Power of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank’s designated officers, or employees) as Borrower’s true and lawful attorney to: (a)
send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse
Borrower’s name on any checks or other forms of payment or security that may come into Bank’s possession; (c) sign
Borrower’s name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle,
and adjust all claims under and decisions with respect to Borrower’s policies of insurance; (f) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable;
and (g) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any
of the Collateral; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described
in clause (g) above, regardless of whether an Event of Default has occurred. The appointment of Bank as Borrower’s attorney
in fact, and each and every one of Bank’s rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully repaid and performed and Bank’s obligation to provide advances hereunder is terminated.


 


9.3
Accounts Collection. At any time after the occurrence and during the continuation of an Event of Default, Bank may notify
any Person owing funds to Borrower of Bank’s security interest in such funds and verify the amount of such Account. Borrower
shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver
such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.


 


9.4
Bank Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities,
as required under the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to Borrower:
(a) make payment of the same or any part thereof; (b) set up such reserves under the Revolving Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed in
Section 6.5 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid or
deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable
rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an agreement
by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.


 


9.5 Bank’s
Liability for Collateral. Bank has no obligation to clean up or otherwise prepare the Collateral for sale. All risk of loss,
damage or destruction of the Collateral shall be borne by Borrower.


 


9.6
No Obligation to Pursue Others. Bank has no obligation to attempt to satisfy the Obligations by collecting them from any other
person liable for them and Bank may release, modify or waive any collateral provided by any other Person to secure any of the
Obligations, all without affecting Bank’s rights against Borrower. Borrower waives any right it may have to require Bank
to pursue any other Person for any of the Obligations.


 


9.7
Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall
be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or
in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default
on Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence
by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective
only in the specific instance and for the specific purpose for which it was given. Borrower expressly agrees that this Section
9.7 may not be waived or modified by Bank by course of performance, conduct, estoppel or otherwise.


 






    	 



    	 



    

 


9.8
Demand; Protest. Except as otherwise provided in this Agreement, Borrower waives demand, protest, notice of protest, notice
of default or dishonor, notice of payment and nonpayment and any other notices relating to the Obligations.


 


10.
NOTICES.


 


Unless
otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement
entered into in connection herewith shall be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to
Bank, as the case may be, at its addresses set forth below:


 


	 	If to Borrower: 	GRIDSENSE INC.
	 	 	2568 Industrial Blvd., Suite 100
	 	 	West Sacramento, CA 95691
	 	 	Attn: Lindon Shiao - CEO
	 	 	FAX: 916.372.4948
	 	 	 
	 	with a copy to:	Acorn Energy, Inc.
	 	 	3903 Centerville Road
	 	 	Wilmington, DE 19807
	 	 	Attn: Heather Mallard – General Counsel
	 	 	FAX: (302) 656-1703
	 	 	 
	 	with a copy to:	Acorn Energy, Inc.
	 	 	3903 Centerville Road
	 		Wilmington,
                                 DE 19807



	 	 	Attn: Michael Barth - CFO
	 	 	FAX: 011 972 3 531 3322
	 	 	 
	 	If to Bank:	Square 1 Bank
	 	 	406 Blackwell Street, Suite 240
	 	 	Durham, North Carolina 27701
	 	 	Attn: Loan Operations Manager
	 	 	FAX: (919) 314-3080
	 	 	 
	 	with a copy to:	Square 1 Bank
	 	 	2420 Sand Hill Road, Suite 100
	 	 	Menlo Park, CA 94025
	 	 	Attn: Andy Weyer
	 	 	FAX: (650) 543-2780






 


The
parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner
given to the other.


 






    	 



    	 



    

 


11.
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.


 


This
Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard
to principles of conflicts of law. Jurisdiction shall lie in the State of California. All disputes, controversies, claims, actions
and similar proceedings arising with respect to Borrower’s account or any related agreement or transaction shall be brought
in the Superior Court of San Mateo County, California or the United States District Court for the Northern District of California,
except as provided below with respect to arbitration of such matters. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL
BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT,
WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY
IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM.
THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR BORROWER, EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY EACH OF THEM. If the jury waiver set forth in this Section 11 is not enforceable, then any dispute, controversy,
claim, action or similar proceeding arising out of or relating to this Agreement, the Loan Documents or any of the transactions
contemplated therein shall be settled by final and binding arbitration held in San Mateo County, California in accordance with
the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed in accordance
with those rules. The arbitrator shall apply California law to the resolution of any dispute, without reference to rules of conflicts
of law or rules of statutory arbitration. Judgment upon any award resulting from arbitration may be entered into and enforced
by any state or federal court having jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this Section.
The costs and expenses of the arbitration, including without limitation, the arbitrator’s fees and expert witness fees,
and reasonable attorneys’ fees, incurred by the parties to the arbitration may be awarded to the prevailing party, in the
discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless
and until the arbitrator decides that one party is to pay for all (or a share) of such costs and expenses, both parties shall
share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator.


 


 


12.
GENERAL PROVISIONS.


 


12.1
Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns
of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however, that neither
this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent
may be granted or withheld in Bank’s sole discretion. Bank shall have the right without the consent of or notice to Borrower
to sell, assign, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations,
rights and benefits hereunder.


 


12.2
Indemnification. Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against:
(a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions
contemplated by this Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank, its officers,
employees and agents as a result of or in any way arising out of, following, or consequential to transactions between Bank and
Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys fees and expenses), except
for losses caused by Bank’s gross negligence or willful misconduct.


 


12.3
Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.


 


12.4
Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement
for the purpose of determining the legal enforceability of any specific provision.


 


12.5
Amendments in Writing, Integration. All amendments to or terminations of this Agreement or the other Loan Documents must be
in writing. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan
Documents.


 






    	 



    	 



    

 


12.6
Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement. Executed copies of the signature pages of this
Agreement sent by facsimile or transmitted electronically in Portable Document Format (“PDF”), or any similar format,
shall be treated as originals, fully binding and with full legal force and effect, and the parties waive any rights they may have
to object to such treatment.


 


12.7
Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so
long as any Obligations remain outstanding or Bank has any obligation to make any Credit Extension to Borrower. The obligations
of Borrower to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall
survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.


 


12.8
Confidentiality. In handling any confidential information, Bank and Borrower and all employees and agents of such party shall
exercise the same degree of care that such party exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that
disclosure of such information may be made (i) in the case of Bank, to the subsidiaries or Affiliates of Bank or Borrower in connection
with their present or prospective business relations with Borrower, (ii) in the case of Bank, to prospective transferees or purchasers
of any interest in the Credit Extensions, provided that they have entered into a comparable confidentiality agreement in favor
of Borrower and have delivered a copy to Borrower, (iii) as required by law, regulations, rule or order, subpoena, judicial order
or similar order, (iv) in the case of Bank, as may be required in connection with the examination, audit or similar investigation
of Bank and (v) as Bank may determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the knowledge or possession of the receiving party
when disclosed to such party, or becomes part of the public domain after disclosure to such receiving party through no fault of
such receiving party; or (b) is disclosed to the receiving party by a third party, provided such receiving party does not have
actual knowledge that such third party is prohibited from disclosing such information.


 


IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.


 


	 	GRIDSENSE INC.
	 	 
	 	By: 	 
	 	 	 
	 	Title: 	 









 


	 	SQUARE 1 BANK
	 	 
	 	By: 	 
	 	 	 
	 	Title: 	 








 


[Signature
Page to Loan and Security Agreement]


 




    	 



    	 



    


 


EXHIBIT
A


 


DEFINITIONS


 


“Accounts”
means all presently existing and hereafter arising accounts, contract rights, payment intangibles and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other
technology) or the rendering of services by Borrower and any and all credit insurance, guaranties, and other security therefor,
as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.


 


“Acquisition”
means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition
of all or substantially all of the assets of Borrower (ii) any merger or consolidation of Borrower into or with another person
or entity (other than a merger or consolidation effected exclusively to change the Borrower’s domicile), or any other corporate
reorganization, in which the stockholders of Borrower in their capacity as such immediately prior to such merger, consolidation
or reorganization, own less than a majority of Borrower’s (or the surviving or successor entity’s) outstanding voting
power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders
of Borrower of shares representing at least a majority of Borrower’s then-total outstanding combined voting power.


 


“Advance”
or “Advances” means a cash advance or cash advances under the Revolving Line.


 


“Affiliate”
means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors,
and general partners.


 


“Ancillary
Services” means any of the following products or services requested by Borrower and approved by Bank under the Revolving
Line, including, without limitation, Automated Clearing House transactions, corporate credit card services, FX Contracts, or other
treasury management services.


 


“Ancillary
Services Sublimit” means a sublimit for Ancillary Services under the Revolving Line not to exceed $250,000.


 


“Authorized
Officer” means someone designated as such in the corporate resolution provided by Borrower to Bank in which this Agreement
and the transactions contemplated hereunder are authorized by Borrower’s board of directors. If Borrower provides subsequent
corporate resolutions to Bank after the Closing Date, the individual(s) designated as “Authorized Officer(s)” in the
most-recently provided resolution shall be the only “Authorized Officers” for purposes of this Agreement.


 


“Bank
Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses, whether generated
in-house or by outside counsel) incurred in connection with the preparation, negotiation, administration, and enforcement of the
Loan Documents; reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses (whether generated
in-house or by outside counsel) incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of
appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.


 


“Borrower’s
Books” means all of Borrower’s books and records including: ledgers; records concerning Borrower’s assets or
liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment,
containing such information.


 


“Borrowing
Base” means an amount equal to 80% (the “Advance Rate”) of Eligible Accounts, as determined by Bank with
reference to the most recent Borrowing Base Certificate delivered by Borrower.


 


“Business
Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of North Carolina are authorized
or required to close.


 




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“Cash”
means unrestricted cash and cash equivalents.


 


“Change
in Control” shall mean a transaction other than a bona fide equity financing or series of financings on terms and from investors
reasonably acceptable to Bank in which any “person” or “group” (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding
of Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group”
to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.


 


“Closing
Date” means the date of this Agreement.


 


“Code”
means the California Uniform Commercial Code as amended or supplemented from time to time.


 


“Collateral”
means the property described on Exhibit B attached hereto and all Negotiable Collateral to the extent not described on Exhibit
B, except to the extent any such property (i) is nonassignable by its terms without the consent of the licensor thereof or another
party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation,
§9406 and §9408 of the Code), (ii) the granting of a security interest therein is contrary to applicable law, provided
that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral,
(iii) constitutes the capital stock of a controlled foreign corporation (as defined in the IRC), in excess of 65% of the voting
power of all classes of capital stock of such controlled foreign corporations entitled to vote, or (iv) property (including any
attachments, accessions or replacements) that is subject to a Lien that is permitted pursuant to clause (c) of the definition
of Permitted Liens, if the grant of a security interest with respect to such property pursuant to this Agreement would be prohibited
by the agreement creating such Permitted Lien or would otherwise constitute a default thereunder, provided, that such property
will be deemed “Collateral” hereunder upon the termination and release of such Permitted Lien.


 


“Collateral
State” means the state or states where the Collateral is located, which is California.


 


“Contingent
Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation,
any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or
in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters
of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or
commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection
or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated
or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided,
however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support
arrangement.


 


“Copyrights”
means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship
and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now
or hereafter existing, created, acquired or held.


 






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“Credit
Extension” means each Advance or any other extension of credit by Bank, to or for the benefit of Borrower hereunder.


 


“EBITDA”
means earnings before tax plus depreciation and amortization plus interest and non-cash expenses.


 


“Eligible Accounts”
means those Accounts that arise in the ordinary course of Borrower’s business that comply with all
of Borrower’s representations and warranties to Bank set forth in Section 5.3; provided, that Bank may change the Advance
Rate and the standards of eligibility based on the results of Bank’s collateral audits by giving Borrower 10 days prior
written notice. Unless otherwise agreed to by Bank, Eligible Accounts shall not include the following:


 





(a)
Account balances that the account debtor has failed to pay in full within 90 days of invoice
date;


 


(b) Account
credit balances greater than 90 days from invoice date;


 


(c)
Accounts with respect to an account debtor, 25% of whose Accounts the account debtor has failed to pay within 90 days of invoice
date;


 


(d)
Accounts with respect to an account debtor, including the account debtor’s subsidiaries and Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, to the extent such obligations exceed the aforementioned percentage, except
(i) with respect to Accounts where Florida Power & Light Company is the account debtor, such percentage shall be 50% or (ii)
as approved in writing by Bank;


 


(e)
Accounts with respect to which the account debtor does not have its principal place of business in the United States, except
for Eligible Foreign Accounts;


 


(f)
Accounts with respect to which the account debtor is the United States or any department, agency, or instrumentality of the
United States, except for Accounts of the United States if the payee has assigned its payment rights to Bank and the assignment
has been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);


 


(g)
Accounts with respect to which Borrower is liable to the account debtor for goods sold or services rendered by the account
debtor to Borrower, but only to the extent of any amounts owing to the account debtor against amounts owed to Borrower;


 


(h)
Accounts with respect to which the account debtor is an officer, employee, agent, Subsidiary or Affiliate of Borrower;


 


(i)
Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and
hold, demo or promotional, or other terms by reason of which the payment by the account debtor may be conditional;


 


(j)
“Advanced Billings,” i.e., accounts that have not yet been billed to the account debtor or that relate to deposits
(such as good faith deposits) or other property of the account debtor held by Borrower for the performance of services or delivery
of goods which Borrower has not yet performed or delivered;


 


(k)
Accounts with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such
dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business;


 


(l)
Accounts the collection of which Bank reasonably determines after inquiry and consultation with Borrower to be doubtful;


 


(m) Retentions
and hold-backs; and


 


(n)
“Progress Billings,” i.e., accounts that are billed based on project milestones and not on an actual time and
materials basis.


 






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“Eligible
Foreign Accounts” means Accounts: (x) with respect to which the account debtor does not have its principal place of
business in the United States; and (y) which do not otherwise fall within any of subsections (a) through (d) and (f) through
(n) of the definition of “Eligible Accounts,” and that are: (i) supported by one or more letters of credit in an
amount and of a tenor, and issued by a financial institution, acceptable to Bank, (ii) insured by the Export Import Bank of
the United States, (iii) generated by an account debtor with its principal place of business in Canada, except for the
Province of Quebec, or (iv) approved by Bank on a case-by-case basis. All Eligible Foreign Accounts must be calculated in
U.S. Dollars and must be billed by Borrower from a location within the United States of America.


 


“Equipment”
means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.


 


“Event
of Default” has the meaning assigned in Article 8.


 


“FX
Contracts” means contracts between Borrower and Bank for foreign exchange transactions.


 


“Foreign
Exchange Reserve Percentage” means a percentage of reserves for FX Contracts as determined by Bank, in its sole discretion
from time to time.


 


“GAAP”
means generally accepted accounting principles, consistently applied, as in effect from time to time in the United
States.


 


“Indebtedness”
means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease obligations, and (d) all Contingent Obligations, including but
not limited to any sublimit contained herein.


 


“Insolvency
Proceeding” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal
or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement,
or other relief.


 


“Intellectual
Property” means all of Borrower’s right, title, and interest in and to the following:


 


(a) Copyrights,
Trademarks and Patents;


 


(b)
Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;


 


(c)
Any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held;


 


(d)
Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the
right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights
identified above;


 


(e)
All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights; and Patents.


 





(f) All
amendments, renewals and extensions of any of the Copyrights, Trademarks or


 


“Inventory”
means all present and future inventory in which Borrower has any interest.


 




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“Investment”
means any beneficial ownership of (including stock, partnership or limited liability company interest or other securities) any
Person, or any loan, advance or capital contribution to any Person.


 


“IRC”
means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.


 


“Lien”
means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.


 


“Loan
Documents” means, collectively, this Agreement, any note or notes executed by Borrower, and any other document, instrument
or agreement entered into in connection with this Agreement, all as amended or extended from time to time.


 


“Material
Adverse Effect” means a material adverse effect on (i) the operations, business or financial condition of Borrower and its
Subsidiaries taken as a whole, (ii) the ability of Borrower to repay the Obligations or otherwise perform its obligations under
the Loan Documents, or (iii) Borrower’s interest in, or the value, perfection or priority of Bank’s security interest
in the Collateral.


 


“Negotiable
Collateral” means all of Borrower’s present and future letters of credit of which it is a beneficiary, drafts, instruments
(including promissory notes), securities, documents of title, and chattel paper, and Borrower’s Books relating to any of
the foregoing.


 


“Obligations”
means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest
that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower
to others that Bank may have obtained by assignment or otherwise.


 


“Patents”
means all patents, patent applications and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.


 


“Periodic
Payments” means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay
to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and
Bank.


 


“Permitted
Australian Distributions” are distributions from Borrower to Gridsense Pty Limited (Australia) in an amount not to exceed
(i) cumulative positive cash flow generated by Borrower from the Closing Date through the most recent month end period in which
Borrower has provided historical financial reporting plus (ii) cumulative equity infusions provided by Acorn Energy, Inc. beginning
as of Closing Date through the date in which Borrower desires to make a transfer to Gridsense Pty Limited (Australia).


 


“Permitted
Indebtedness” means:


 


(a) Indebtedness
of Borrower in favor of Bank arising under this Agreement or any other Loan
Document;


 


(b) Indebtedness
existing on the Closing Date and disclosed in the Schedule;


 


(c)
Indebtedness not to exceed $250,000 in the aggregate in any fiscal year of Borrower secured by a lien described in clause
(c) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed at the time it is incurred the
lesser of the cost or fair market value of the property financed with such Indebtedness;


 


(d) Subordinated
Debt;


 


(e) Indebtedness
to trade creditors incurred in the ordinary course of business; and


 




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(f)
Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased
or the terms modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.


 


“Permitted
Investment” means:


 


(a) Investments
existing on the Closing Date disclosed in the Schedule;


 


(b)
(i) Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year
from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation
or Moody’s Investors Service, (iii) Bank’s certificates of deposit maturing no more than one year from the date of
investment therein, and (iv) Bank’s money market accounts; (v) Investments in regular deposit or checking accounts held
with Bank or subject to a control agreement in favor of Bank; and (vi) Investments consistent with any investment policy adopted
by the Borrower’s board of directors;


 


(c)
Repurchases of stock from former employees or directors of Borrower under the terms of applicable repurchase agreements (i)
in an aggregate amount not to exceed $250,000 in any fiscal year, provided that no Event of Default has occurred, is continuing
or would exist after giving effect to the repurchases, or (ii) in any amount where the consideration for the repurchase is the
cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists;


 


(d) Investments
accepted in connection with Permitted Transfers;


 


(e) Investments
of Subsidiaries in or to other Subsidiaries or Borrower;


 


(f)
Investments not to exceed $250,000 outstanding in the aggregate at any time consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers
or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plan agreements approved by Borrower’s Board of Directors;


 





(g) Investments
in unfinanced capital expenditures in any fiscal year, not to exceed $250,000;


 


(h)
Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers
and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course
of Borrower’s business;


 


(i)
Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers
who are not Affiliates, in the ordinary course of business, provided that this subparagraph (h) shall not apply to Investments
of Borrower in any Subsidiary;


 


(j)
Joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive
licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments
by Borrower do not exceed $250,000 in the aggregate in any fiscal year; and


 


(k) Investments
permitted under Section 7.3.


 




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“Permitted
Liens” means the following:


 


(a)
Any Liens existing on the Closing Date and disclosed in the Schedule (excluding Liens to be satisfied with the proceeds of
the Credit Extensions) or arising under this Agreement, the other Loan Documents, or any other agreement in favor of Bank;


 


(b)
Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and for which Borrower maintains adequate reserves;


 


(c)
Liens not to exceed $250,000 in the aggregate in any fiscal year (i) upon or in any Equipment (other than Equipment financed
by a Credit Extension) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment
or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such
Equipment at the time of its acquisition, in each case provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such Equipment;


 


(d)
Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described
in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered
by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase;


 


(e) Liens
securing Subordinated Debt; and


 


(f)
Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Sections
8.4 (attachment) or 8.7 (judgments).


 


“Permitted
Transfer” means the conveyance, sale, lease, transfer or disposition by Borrower or any Subsidiary of:


 


(a) Inventory
in the ordinary course of business;


 


(b) licenses
and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of
business;


 





(c)
worn-out, surplus or obsolete Equipment not financed with the proceeds of Credit Extensions;


 


(d) grants
of security interests and other Liens that constitute Permitted Liens; and


 


(e) other
assets of Borrower or its Subsidiaries that do not in the aggregate exceed $250,000 during any fiscal year.


 


“Person”
means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.


 


“Prime
Rate” means the variable rate of interest, per annum, most recently announced by Bank, as its “prime rate,”


whether
or not such announced rate is the lowest rate available from Bank.


 


“Responsible
Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, Vice President
of Finance and the Controller of Borrower, as well as any other officer or employee identified as an Authorized Officer in the
corporate resolution delivered by Borrower to Bank in connection with this Agreement.


 




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“Revolving
Line” means a Credit Extension of up to $1,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).


 


“Revolving
Maturity Date” means 364 days from the Closing Date.


 


“Schedule”
means the schedule of exceptions attached hereto and approved by Bank, if any.


 


“SOS
Reports” means the official reports from the Secretaries of State of each Collateral State, the state where Borrower’s
chief executive office is located, the state of Borrower’s formation and other applicable federal, state or local government
offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.


 


“Subordinated
Debt” means any debt incurred by Borrower that is subordinated in writing to the debt owing by Borrower to Bank on
terms reasonably acceptable to Bank (and identified as being such by Borrower and Bank).


 


“Subsidiary”
means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest
or (ii) more than 50% of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary
voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is
being made, is owned by Borrower, either directly or through an Affiliate.


 


“Trademarks”
means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same
and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.


 




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DEBTOR
GRIDSENSE INC.


 


SECURED PARTY: SQUARE 1 BANK


 


EXHIBIT
B


 


COLLATERAL
DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT


 


All personal
property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently existing or hereafter
created or acquired, and wherever located, including, but not limited to:


 


(a)
all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper),
deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), financial
assets, general intangibles (including patents, trademarks, copyrights, goodwill, payment intangibles, domain names and software),
goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or
to be furnished under a contract of service, and including returns and repossessions), investment property (including securities
and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records with respect to any
of the foregoing, and the computers and equipment containing said books and records;


 


(b)
any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds,
and all supporting obligations and the security therefor or for any right to payment. All terms above have the meanings given
to them in the California Uniform Commercial Code, as amended or supplemented from time to time, including revised Division 9
of the Uniform Commercial Code- Secured Transactions.


 


Notwithstanding
the foregoing, the Collateral shall not include any of the intellectual property, in any medium, of any kind or nature whatsoever,
now or hereafter owned or acquired or received by Borrower, or in which Borrower now holds or hereafter acquires or receives any
right or interest (collectively, the “Intellectual Property”); provided, however, that the Collateral shall include
all accounts and general intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of
all or any part, or rights in, the foregoing (the “Rights to Payment”).


 


Notwithstanding
the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual
Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective
as of November 2, 2012, include the Intellectual Property to the extent and only to the extent necessary to permit perfection
of Bank’s security interest in the Rights to Payment, and further provided, however, that Bank’s enforcement rights
with respect to any security interest in the Intellectual Property shall be absolutely limited to the Rights to Payment only,
and Bank shall have no recourse whatsoever with respect to the underlying Intellectual Property.


 




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EXHIBIT C


 


LOAN
ADVANCE / PAYDOWN REQUEST FORM


 


[Please
refer to New Borrower Kit]


 




    	 



    	 



    


 


EXHIBIT
D


 


BORROWING
BASE CERTIFICATE


 


[Please
refer to New Borrower Kit]


 




    	 



    	 



    


 


EXHIBIT
E


 


COMPLIANCE CERTIFICATE


 


[Please refer to New Borrower Kit]


 




    	 



    	 



    


 


SCHEDULE
OF EXCEPTIONS


 


[Please
see attached]


 




    	 



    	 



    


 


Permitted
Indebtedness


 


	Deferred
    Fees due to M. Pasquale	$
    	70,000	USD
	Deferred
    Fees due to Prime Energy Partners	$
    	53,000	USD
	Current
    Fees due to Prime Energy Partners	$
    	150,000	USD



 



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Permitted
Investments


 


See “Inbound
Licenses”


 




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Permitted
Liens


 


None


 




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Intellectual Property – Patents


 


	 	 	 	 	Date
    of	 	Pending	 	Issued
    Patent
	Description	 	 	 	Application	 	Issue	 	Serial
    No.	 	No.
	 	 	 	 	 	 	 	 	 	 	 
	Apparatus
    and Method for	 	AUS	 	11/9/2001	 	1/22/2004	 	37972/00	 	766044
	Fault
    Detection on Conductors	 	GB	 	4/12/2000	 	8/9/2006	 	00916700.8	 	1198717
	 	 	ZA	 	4/12/2000	 	5/13/2002	 	2001/9293	 	2001/9293
	 	 	USA	 	1/18/2002	 	8/3/2004	 	09/958,631	 	6,771,078
	 	 	 	 	 	 	 	 	 	 	 
	A
    Transformer and a Method of Monitoring an	 	AUS	 	1/2/2009	 	7/30/2009	 	2009200007	 	2009200007
	Operation
    Property of the Transformer	 	CA	 	1/8/2009	 	 	 	2648816	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Method
    and Apparatus for	 	USA	 	5/14/2004	 	9/18/2007	 	10/845,892	 	7,272,520
	Determining
    a Current in a Conductor	 	CA	 	5/11/2004	 	1/10/2012	 	2467054	 	2467054
	 	 	 	 	 	 	 	 	 	 	 
	Apparatus
    and Method for	 	AUS
    	 	4/12/2000
    	 	11/14/2000
    	 	37973/00
    	 	766435
    
	Electrical
    Measurements	 	ZA	 	11/21/2001	 	5/13/2002	 	2001/9294	 	2001/9294
	on
    Conductors	 	USA	 	10/11/2001	 	12/7/2004	 	09/958,848	 	6,828,770
	 	 	CA	 	10/8/2001	 	12/29/2009	 	2366467	 	2366467
	 	 	 	 	 	 	 	 	 	 	 
	Systems
    & Methods for Monitoring Distribution Line Capacitor Systems	 	USA	 	6/8/2012	 	 	 	61/657,335	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Systems
    & Methods for Providing Transformer Rating using Harmonics Data	 	USA	 	2/28/2012	 	 	 	61/604,173	 	 





 






    	4



    	 



    

 


Intellectual Property
– Trademarks


 


		 	 	 	Date
    of	 	Pending	 	Registered
	Trademarks	 	 	 	Application.	 	Registration	 	Serial No	 	Trademark
    No
	DGWatch	 	USA	 	3/6/2012	 	 	 	85561555	 	 
	HighV	 	USA	 	1/31/2012	 	 	 	85530109	 	 
	Grid
    Insite	 	USA	 	1/31/2012	 	 	 	85529947	 	 
	BushingIQ	 	USA	 	12/1/2010	 	6/05/2012	 	85188227	 	4154904
	DistributionIQ	 	USA	 	1/19/2012	 	 	 	85520790	 	 
	TransformerIQ	 	USA	 	5/4/2012	 	 	 	85616898	 	 
	DemandIQ	 	USA	 	4/29/2011	 	 	 	85308403	 	 
	BreakerIQ	 	USA	 	6/14/2010	 	8/16/2011	 	85062546	 	4013606
	CableIQ	 	USA	 	6/14/2010	 	7/5/2011	 	85062531	 	3991130
	LineIQ	 	USA	 	6/14/2010	 	7/5/2011	 	85062524	 	3991129





 


We have
started the process to trademark our company name, GridSense. We have identified another company operating in a


different
field that is using the GridSense name. We are investigating whether to take any action necessary.


 




    	5



    	 



    


 


Intellectual
Property – Copyrights


 


All sales
and marketing material, including user, owner, instruction and installation manuals.


 




    	6



    	 



    


 


Prior
Names


 


CHK Wireless
Technologies (USA) Inc.


 




    	7



    	 



    


 


Litigation


 


 


Received
demand on August 9, 2012 from Xtended Camera Support, Inc. for payment of a judgment (of approximately $28,000) against On-Line
Monitoring, Inc. (“OMI”), a company certain assets of which were acquired by Borrower in 2010. Settlement discussions
are expected to commence soon.”


 




    	8



    	 



    


 


Inbound
Licenses


 


Term sheet
with large West Coast utility for inbound license and new product development which may result in creation of new licensed and
owned intellectual property.


 




    	9



    	 



    


 


CORPORATE
RESOLUTION


 


The undersigned duly elected and qualified Secretary
of GRIDSENSE INC. (the “Company”) do hereby certify that the following is a true and correct copy of certain resolutions
adopted at a meeting of the Company’s Board of Directors held on


in
accordance with applicable law and the Company’s bylaws, and that such resolutions are now unmodified and in full force
and effect:


 


BE
IT RESOLVED, that:


 


1.
Any one (1) of the following, duly elected officers of the Company (each, an “Authorized Officer”) whose genuine
original signature appears next to his or her name is authorized to act for, on behalf of, and in the name of the Company in connection
with the resolutions below:


 





	Title	 	Name	 	Authorized Signature
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 



 


2.
The Authorized Officers are hereby empowered to execute a Square 1 Bank (“Bank”) Signature Card and/or Funds Transfer
Agreement, and any other agreements or documents required by Bank in connection therewith, on behalf of the Company upon the terms
and conditions set out in the Signature Card and/or Funds Transfer Agreement and other Agreements and, from time to time, to make
changes to the Signature Card, Funds Transfer Agreement and/or other Agreements or any Exhibit thereto, including without limitation
the list of Authorized Representatives;


 


3.
Any Authorized Officer may borrow money from time to time from Bank, and may negotiate and procure loans, letters of credit,
foreign exchange contracts and other financial accommodations from Bank, including without limitation, that certain Loan and Security
Agreement dated as of November 2, 2012, and also to execute and deliver to Bank one or more renewals, extensions, or modifications
thereof;


 


4.
Give security for any liabilities of the Company to Bank by grant, security interest, assignment, lien, deed of trust or mortgage
upon any real or personal property, tangible or intangible of the Company;


 


5.
Purchase, sell, exchange, assign, endorse for transfer and/or deliver certificates and/or instruments representing stocks,
bonds, evidences of Indebtedness or other securities owned by the Company, whether or not registered in the name of the Company


 


6.
Discount with the Bank, commercial or other business paper belonging to the Company made or drawn by or upon third parties,
without limit as to amount;


 


7.
The Bank is authorized and directed to pay the proceeds of any such loans or discounts as directed by the persons so authorized
to sign; and


 


8.
Execute and deliver in form and content as may be required by the Bank any and all notes, evidences of indebtedness, applications
for letters of credit, guaranties, subordination agreements, loan and security agreements, financing statements, assignments,
liens, deeds of trust, mortgages, trust receipts and other agreements, instruments or documents to carry out the purposes of these
Resolutions, any or all of which may relate to all or to substantially all of the Company’s property and assets;


 


9.
The Authorized Officers may designate additional or alternate individuals as being authorized to request loan advances, to
do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents
and agreements as he or she may in his or her discretion deem reasonably necessary or proper in order to carry into effect the
provisions of these Resolutions.


 






    	10



    	 



    

 


10.
Any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, and the authority conferred herein may be exercised singly by any such officer, and these resolutions shall
continue in full force and effect until written notice of modification or revocation is received and accepted Bank (such notice
to have no effect on any action previously taken by the Bank in reliance on these Resolutions). Bank may rely upon any form of
notice, which it in good faith believes to be genuine or what it purports to be.


 


11.
The Resolutions are in full force and effect as of the date of this Certificate and are intended to replace, as of this date,
any Resolutions previously given by the Company to Bank in connection with the matters described herein; these Resolutions and
any borrowings or financial accommodations under these Resolutions have been properly noted in the corporate books and records,
and have not been rescinded, revoked or modified; neither the foregoing Resolutions nor any actions to be taken pursuant to them
are or will be in contravention of any provision of the articles of incorporation or bylaws of the Company or of any agreement,
indenture or other instrument to which the Company is a party or by which it is bound; and to the extent the articles of incorporation
or bylaws of the Company or any agreement, indenture or other instrument to which the Company is a party or by which it is bound
require the vote or consent of shareholders of the Company to authorize any act, matter or thing described in the foregoing Resolutions,
such vote or consent has been obtained.


 


In
Witness Whereof, I have affixed my name as Secretary and have caused the corporate seal (where available) of said Company to be
affixed on November 2, 2012.


 


	 	 
	 	Secretary*






 





*If the certifying officer is designated as the only
signer in these resolutions then another corporate officer must also sign.


 





 



 




    	11



    	 



    


 


SQUARE
1 BANK


Member FDIC


 


ITEMIZATION
OF AMOUNT FINANCED


DISBURSEMENT INSTRUCTIONS


(Revolver)


 


 





	Name(s): GRIDSENSE INC.	Date: November 2, 2012



 


	 	$1,000,000	credited to deposit account No.
                            when Advances are requested or disbursed to Borrower by cashiers check or wire transfer



 


Amounts
paid to others on your behalf:


 


	 	$5,000	to Square 1 Bank for Facility Fee
	 	$                           	to Square 1 Bank for Document Fee (if applicable)
	 	$                           	to Square 1 Bank for accounts receivable audit (estimate)
	 	$                           	to Bank counsel fees and expenses
	 	$                           	to                           
    
	 	$                           	to                           
	 	$                           	TOTAL (AMOUNT FINANCED)



 


Upon consummation
of this transaction, this document will also serve as the authorization for Square 1 Bank to disburse the loan proceeds as stated
above.


 


		 	
	Signature	 	Signature



 






    	 



    	 



    

 









USA
PATRIOT ACT


NOTICE


OF


CUSTOMER
IDENTIFICATION


 


IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT


 


To
help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions
to obtain, verify, and record information that identifies each person who opens an account.


 


WHAT THIS
MEANS FOR YOU: when you open an account, we will ask your name, address, date of birth, and other information that will allow
us to identify you. We may also ask to see your driver’s license or other identifying documents.


 




    	 



    	 



    


 


 





SQUARE
1 BANK


 


AUTOMATIC
DEBIT AUTHORIZATION


 


Member FDIC


 


 





To: Square
1 Bank


 


Re: Loan
#                                                         


 


You
are hereby authorized and instructed to charge account No.                                                          in
the name of GRIDSENSE INC. for facility fees, principal, interest and other payments due on above
referenced loan as set forth below and credit the loan referenced above.


 


[X]
Debit the Facility Fee as it becomes due according to the terms of the Loan and Security Agreement and any renewals or
amendments thereof.


 


[X]
Debit each interest payment as it becomes due according to the terms of the Loan and Security Agreement and any renewals or amendments
thereof.


 


[X]
Debit each principal payment as it becomes due according to the terms of the Loan and Security Agreement and any renewals or
amendments thereof.


 


[X]
Debit each payment for Bank Expenses as it becomes due according to the terms of the Loan and Security Agreement and any
renewals or amendments thereof.


 


This Authorization
is to remain in full force and effect until revoked in writing.


 


 


	Borrower
    Signature	Date
	 	 
	 	November
    2, 2012
	 	 
	 	November
    2, 2012



 



    	 



    	 



    


 


	Phone:
             	SQUARE
1 BANK
	Fax (650)
543-2780	CLIENT AUTHORIZATION



 


General
Authorization


 


I
hereby authorize Square 1 Bank to use my company name, logo, and information relating to our banking relationship in its marketing
and advertising campaigns which is intended for Square 1 Bank’s customers, prospects and shareholders.


 


Square 1 Bank will
forward any advertising or article including client for prior review and approval.


 


	 	 
	Signature	 
	 	 
	 	 
	Printed Name                              
    Title	
	 	 
	GRIDSENSE
    INC. 	 
	Company	 
	 	 
	2568
    Industrial Blvd., Suite 100	 
	Mailing
    Address	 
	 	 
	East
    Sacramento, CA 95691	 
	City,
    State, Zip Code	 
	 	 
	 	 
	Phone
    Number	 
	 	 
	916.372.4948	 
	Fax
    Number	 
	 	 
	 	 
	E-Mail	 
	 	 
	November
    2, 2012	 
	Date