PLEDGE
AND SECURITY AGREEMENT


 


THIS
PLEDGE AND SECURITY AGREEMENT (“Agreement”) is made as of April 23, 2015, by ACORN ENERGY, INC. (“Pledgor”)
in favor of Square 1 Bank (“Bank”).


 


RECITALS


 


Bank
has entered into a transaction with Gridsense Inc. (“Borrower”), pursuant to a Loan and Security Agreement dated as
of November 2, 2012, as may be amended from time to time (the “Loan Agreement”). Pledgor owns certain equity
securities of the Borrower and expects to derive economic benefit from Bank’s dealing with Borrower in accordance with the
Loan Agreement, and has entered into an Unconditional Guaranty dated on or about December 30, 2013 with respect to the present
and future obligations of Borrower to Bank (as amended from time to time, including without limitation by that certain Amendment
to and Affirmation of Unconditional Guaranty dated July 16, 2014, the “Guaranty”). Pledgor has agreed, for
good and valuable consideration, to secure a portion of its obligations under the Guaranty with the money market account described
on attached Exhibit A (the “Account”). All terms used without definition in this Agreement shall have the meaning
assigned to them in the Loan Agreement. All terms used without definition in this Agreement or in the Loan Agreement shall have
the meaning assigned to them in the Code.


 


NOW,
THEREFORE, Pledgor and Bank agree as follows:


 


1. Pledge
of Collateral.




 


(a)Pledgor
hereby pledges to Bank and grants to Bank a security interest in the Account, together with all proceeds and substitutions thereof,
all interest paid thereon, and all other cash and noncash proceeds of the foregoing (all hereinafter called the “Pledged
Collateral”), as security for the prompt performance of all of Pledgor’s obligations (the “Obligations”)
with respect to, or arising out of, the Guaranty.


 


(b)Pledgor
authorizes Bank to file such financing statements, and take such other actions as Bank determines from time to time may be necessary
or appropriate to perfect the security interest granted hereunder.


 


(c)The
pledge of a security interest in the Pledged Collateral hereunder remains in effect for the term of this Agreement notwithstanding
any release by Bank of any other collateral in connection with the Loan Agreement or the Guaranty or any other agreement in effect
between the Bank and the Pledgor, now or hereafter arising.


 


2.Representations,
Warranties and Covenants. Pledgor represents and warrants to and covenants with Bank that:


 


(a)The
Pledged Collateral is owned by Pledgor free and clear of any security interests, liens, encumbrances, options or other restrictions
created by Pledgor;


 


(b)Pledgor
has full power and authority to create a first lien on the Pledged Collateral in favor of Bank and no disability or contractual
obligation exists that would prohibit Pledgor from pledging the Pledged Collateral pursuant to this Agreement, and Pledgor will
not assign, create or permit to exist any other claim to, lien or encumbrance upon, or security interest in any of the Pledged
Collateral;


 


(c)The
Pledged Collateral is not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding,
and Pledgor knows of no reasonable grounds for the institution of any such proceedings; and


 


(d)Pledgor
shall at all times maintain a balance in the Account not less than $500,000.00.


 




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(e)Pledgor
shall not transfer, encumber, dispose of, withdraw, or otherwise direct the payment of any proceeds, interest, or amounts payable
with respect to the Pledged Collateral for so long as it is subject to this Agreement.


 


All
the above representations and warranties shall survive the making of this Agreement.


 


3.Events
of Default. Each of the following shall constitute an event of default (“Event of Default”) hereunder:


 


(a)The
occurrence and continuance of an Event of Default under the Loan Agreement or the Guaranty or in any other present or future agreement
between Pledgor and Bank; or


 


(b)The
breach of any provision of this Agreement by Pledgor or the failure by Pledgor to observe or perform any of the provisions of
this Agreement.


 


4.Bank’s
Remedies Upon Default.


 


Upon
the occurrence of an Event of Default, Bank shall have the right to exercise all such rights as a secured party under the Code
as it, in its sole judgment, shall deem necessary or appropriate.


 


5.Waivers;
Indemnification.


 


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


 


(b)Indemnification.
Pledgor agrees to defend, indemnify and hold harmless Bank and its officers, employees, and affiliates against all losses or expenses
in any way suffered, incurred, or paid by Bank as a result of or in any way arising out of, following, or consequential to transactions
between Bank and Pledgor, under this Agreement or the Guaranty (including without limitation reasonable attorneys’ fees
and expenses), except for losses caused by Bank’s gross negligence or willful misconduct.


 


6.Notices.
Unless otherwise later agreed to in writing, all notices or demands by any party regarding this Agreement shall be in writing
and shall be personally delivered or sent by certified mail, postage prepaid, return receipt requested, or by telefacsimile to
Pledgor or to Bank, as the case may be at the addresses set forth on the signature page hereto.


 


7.This
Agreement shall be governed by, and construed in accordance with, the internal laws of the State of North Carolina without regard
to principles of conflicts of law. Jurisdiction shall lie in the State of North Carolina. All disputes, controversies, claims,
actions and similar proceedings arising with respect to your account or any related agreement or transaction shall be brought
in the General Court of Justice of North Carolina sitting in Durham County, North Carolina or the United States District Court
for the Middle District of North Carolina except as provided below with respect to arbitration of such matters. GUARANTOR ACKNOWLEDGES
THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. GUARANTOR, AFTER CONSULTING OR HAVING HAD
THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF ITS CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT GUARANTOR MAY
HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT 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 GUARANTOR, EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY BANK. If the jury waiver set forth in this Section 7 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 Durham County, North Carolina 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 North Carolina 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.


 




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8.General
Provisions.


 


8.1Successors
and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Pledgor 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 Pledgor to sell, transfer, negotiate, or grant participation in all or any part of, or any interest
in, Bank’s obligations, rights and benefits hereunder.


 


8.2Time
of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.


 


8.3Severability
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.


 


8.4Amendments
in Writing, Integration. This Agreement cannot be amended or terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement, if any, are merged
into this Agreement and with any other written agreement concerning the Obligations previously entered into by the parties.


 


8.5Counterparts.
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.


 


8.6Survival.
All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Pledgor to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities
described in Section 5(b) shall survive until all applicable statute of limitations periods with respect to actions that may be
brought against Bank have run.


 


8.7Term.
This Agreement shall remain in effect so long as any Obligation, whether or not contingent or unliquidated, now or hereafter arising,
remains in existence.


 




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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.


 


	 	Bank:
	 	 
	 	SQUARE 1 BANK
	 	 
	 	By:	 
	 	Title:	 
	 	 	 
	 	Address for Notices:
	 	Loan Operations Manager
	 	406 Blackwell Street, Suite 240, Durham, NC 27701
	 	 	 
	 	Pledgor:
	 	 
	 	ACORN ENERGY, INC.
	 	 
	 	By:	 
	 	Title:	 
	 	 	 
	 	Address for Notices:
	 	 
	 	 



 






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EXHIBIT
A


 


Money
Market Account No. 4092644, held at Square 1 Bank, in the minimum amount of $500,000, in the name of ACORN ENERGY, INC. and any
and all subsequent replacements thereof.


 






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